Report: Indian government is planning outright ban on cryptocurrency

The proposed bill would ban trading, mining, and even holding cryptocurrencies.

Read the whole story

 

[dylane]

Okay, I'll bite. Describe for me a specific example of a case where "decentralized finance" would make life concretely better than it is now in some significant way.

Apparently you can't be bothered to actually spend 30 seconds to google this but I'll go ahead and give you some of my time and write you this response. Not sure why, to be honest, because you seem closed-minded about the subject already, but here goes.

DeFi concretely makes life better for some people in small but meaningful ways:

•1 DeFi does not require an intermediary, which mitigates several issues and inefficiencies.

•2 DeFi markets and credit facilities are open 24/7/365; no need to wait for the bank to open.

•3 DeFi is open to anyone, even if they have bad credit. No closed doors because someone stole your identity and ruined your credit, for example. Many more reasons why this is good. Some reasons why this could be bad.

1. Is not the transaction cost an "intermediary" in a structural sense? This bullet point is vague to the point of uselessness; I genuinely don't know what you mean or even what could be meant.

2. Doesn't venmo/cashapp/paypal cover this use case? I used venmo this morning to pay for breakfast. Instantly.

3. I'm having trouble, conceptually, with the idea of giving people loans without doing due diligence -- "can the person I'm loaning money to pay me back" seems like the key factor in deciding whether or not to loan them the money. I mean, overextended credit was the problem in the subprime mortgage crisis, so how is "DeFi" not an over-leveraged unsecured debt market? Is it just because the insecurity is spread across the entire system?

---

None of this addresses the real problem with cryptocurrency, the baked-in deflationary nature. Deflation discourages economic activity -- strongly -- and is rightly feared by economists.

Let's get ridiculous and say that BTC is going to infinity. I mean,.. let's make the numbers manageable and pretend right now it's 50k, and that it could go to a million. I've seen that said -- BTC to a million; it makes the math easier, because that's 20x what it's worth now.

For every single purchase you make with BTC, you shouldn't really think of it as the current value, but the expected value. Which means -- your 50 dollar movie night with your partner actually "costs" you 1000 dollars. Would I spend 1000 bucks to go to the theatre? No, I wouldn't. Because I'd rather have 1000 bucks in two years than a date with my wife. That vacation we're planning? 3500 bucks? That's 70k in future-BTC! That new car? 600k. Nope, I'll make this one last as long as it can.

So it is with all purchases in a deflationary economy. You shouldn't set up your economy in a way that so very strongly discourages any luxury spending... It's bad for your monetary velocity. If no one's buying anything at all because hey, in two years BTC will be a million bucks per, discretionary spending should drop to near zero. New paperback? Not for 200 bucks, no way.

You really, really don't want discretionary spending to dry up, or cease altogether. That'd be "bad."

If that isn't the case -- if someone has done away with the fundamental problem of a deflationary-by-design model, I'm all ears. I haven't come across anything other than hand-wavey bull.

The point about deflationary assets is a good one, but given the power of compounding, that's true of anything you buy when you could have invested the money itself. Young Warren Buffett was apparently famous in his family for saying things like, "Do I want to pay $300,000 for this haircut?"

I don't want this to be construed as being a bitcoin bull, I'm not, but neither am I a complete skeptic. So many bulls and bears seem to think in totality, that bitcoin is either going to take over the world or go to zero, that there is no middle ground or room for bitcoin (or something like it) to serve a purpose somewhere in the middle.

rn mentioned one of these reasons above, which is what if you live somewhere you can't trust the central authority. That's not a small number of people, depending on your definitions, something like half to 2/3rds of the world live under authoritarian regimes. In general, I think there is demand for being able to move semi-large funds around the globe in a way that can't easily be stopped by authorities. Some of these are for nefarious purposes, but others might be to get support to persecuted minorities where other methods are blocked.

Even something like the fragmented state of the cannabis market in the U.S., where even where it is legal, growers and dispensers have difficulty accessing the financial services available to most other businesses, should give pause to thinking that there are no uses for a decentralized currency in the developed world.

 

[dylane]

Okay, I'll bite. Describe for me a specific example of a case where "decentralized finance" would make life concretely better than it is now in some significant way.

Apparently you can't be bothered to actually spend 30 seconds to google this but I'll go ahead and give you some of my time and write you this response. Not sure why, to be honest, because you seem closed-minded about the subject already, but here goes.

DeFi concretely makes life better for some people in small but meaningful ways:

•1 DeFi does not require an intermediary, which mitigates several issues and inefficiencies.

•2 DeFi markets and credit facilities are open 24/7/365; no need to wait for the bank to open.

•3 DeFi is open to anyone, even if they have bad credit. No closed doors because someone stole your identity and ruined your credit, for example. Many more reasons why this is good. Some reasons why this could be bad.

1. Is not the transaction cost an "intermediary" in a structural sense? This bullet point is vague to the point of uselessness; I genuinely don't know what you mean or even what could be meant.

2. Doesn't venmo/cashapp/paypal cover this use case? I used venmo this morning to pay for breakfast. Instantly.

3. I'm having trouble, conceptually, with the idea of giving people loans without doing due diligence -- "can the person I'm loaning money to pay me back" seems like the key factor in deciding whether or not to loan them the money. I mean, overextended credit was the problem in the subprime mortgage crisis, so how is "DeFi" not an over-leveraged unsecured debt market? Is it just because the insecurity is spread across the entire system?

---

None of this addresses the real problem with cryptocurrency, the baked-in deflationary nature. Deflation discourages economic activity -- strongly -- and is rightly feared by economists.

Let's get ridiculous and say that BTC is going to infinity. I mean,.. let's make the numbers manageable and pretend right now it's 50k, and that it could go to a million. I've seen that said -- BTC to a million; it makes the math easier, because that's 20x what it's worth now.

For every single purchase you make with BTC, you shouldn't really think of it as the current value, but the expected value. Which means -- your 50 dollar movie night with your partner actually "costs" you 1000 dollars. Would I spend 1000 bucks to go to the theatre? No, I wouldn't. Because I'd rather have 1000 bucks in two years than a date with my wife. That vacation we're planning? 3500 bucks? That's 70k in future-BTC! That new car? 600k. Nope, I'll make this one last as long as it can.

So it is with all purchases in a deflationary economy. You shouldn't set up your economy in a way that so very strongly discourages any luxury spending... It's bad for your monetary velocity. If no one's buying anything at all because hey, in two years BTC will be a million bucks per, discretionary spending should drop to near zero. New paperback? Not for 200 bucks, no way.

You really, really don't want discretionary spending to dry up, or cease altogether. That'd be "bad."

If that isn't the case -- if someone has done away with the fundamental problem of a deflationary-by-design model, I'm all ears. I haven't come across anything other than hand-wavey bull.

The point about deflationary assets is a good one, but given the power of compounding, that's true of anything you buy when you could have invested the money itself. Young Warren Buffett was apparently famous in his family for saying things like, "Do I want to pay $300,000 for this haircut?"

I don't want this to be construed as being a bitcoin bull, I'm not, but neither am I a complete skeptic. So many bulls and bears seem to think in totality, that bitcoin is either going to take over the world or go to zero, that there is no middle ground or room for bitcoin (or something like it) to serve a purpose somewhere in the middle.

rn mentioned one of these reasons above, which is what if you live somewhere you can't trust the central authority. That's not a small number of people, depending on your definitions, something like half to 2/3rds of the world live under authoritarian regimes. In general, I think there is demand for being able to move semi-large funds around the globe in a way that can't easily be stopped by authorities. Some of these are for nefarious purposes, but others might be to get support to persecuted minorities where other methods are blocked.

Even something like the fragmented state of the cannabis market in the U.S., where even where it is legal, growers and dispensers have difficulty accessing the financial services available to most other businesses, should give pause to thinking that there are no uses for a decentralized currency in the developed world.

F off... it takes about 100 years for 20$ to become 300k at 10% annual compounding interest.

And that's without accounting for inflation, against inflation you can probably get at most 5% and that requires 200 years beating inflation at 5% which is better than the market in the last 50 years.

Notice that bitcoin already achieved this according to the pizza tracker https://bitcoinpizzaindex.net/ and that's just a decade. Current bitcoin prices mean the coin is broken beyond redemption, and worse, energy waste correlates directly with the price until the next halving in 2024, so quite a few years of eco-waste ahead of us.

The haircut example is the title of a piece on Warren Buffett.

https://www.morningstar.com/news/dow-jo ... 00-haircut

So blame him, or the reporter, or the faulty memories of his family and friends. The point wasn't supposed to be about amounts anyway, just that this basic idea that no one would buy anything they don't have to, because the asset will be worth more in the future. That's a problem we already have, but it's mitigated quite a bit by the fact that most people prefer to consume today rather than 100 years in the future.

Yes, bitcoin has appreciated by orders of magnitude more over the last decade than whatever a normal, diversified portfolio has done. No one expects that to go on forever though, rates of growth inevitably have to slow down. The deflationary aspect that people talk about is the fact that eventually, no more coins will be mined, and that the supply will eventually shrink as coins are lost. As long as bitcoin sits alongside other currencies and the world doesn't move to a "bitcoin standard" though, that doesn't seem like much of a problem.

 

[dylane]

FWIW, if you resort to calling people and the conclusions they've reached "shrill" as though people can't reach different conclusions than yours... isn't the best look.

There are nuanced views against cryptocurrencies here on Ars (like yours) but they appear relatively rare. As the other poster mentioned, if there's an article about the UK trying to ban porn or what have you...the commentators rightly point out the futility of that from a technical point of view. Same thing when media companies tried to get laws passed to outlaw bittorrent.

There's an article today on an indictment against a company providing encryption services to allegedly criminals...and plenty of voices come out and say that yes, strong encryption can benefit criminals and make law enforcement more difficult...but it also has legitimate uses and shouldn't be banned. Likewise, Ars commentators are the first to provide arguments against suggestions that encryption should have a back door available for law enforcement.

Many of those arguments are equally valid for bitcoin, but it's rare to hear people making them on Ars.

There are lots of good arguments against bitcoin! It's been around for over a decade and there still isn't a "killer app" for it. The energy use is atrocious. Lots of the proponents for bitcoin make really bad arguments! But people comparing it to Beanie Babies and tulips seem to be unaware of the differences in magnitude and time for those crazes and this. The sheer length of the "bubble" and the amount of money that has gone into it, should at least give a person pause before dismissing it entirely.