[vec]

I can exchange value today without a banking system in place. I have some paper currency in my possession, and if that doesn't work there are plenty of commodity goods available to barter with. You'll notice that even in situations where cash or barter are feasible the vast majority of actors opt into the banking system anyway.

Cryptocurrencies are genuinely useful for parties who don't have access to the formal banking system for one reason or another, but I've got every reason to believe that crypto-backed banks will still be profitable and that people will flock to them as soon as they're available.

As for microtransactions, I can also consume 15 minutes of some service and not pay for it at 15:01, then automatically generate another burner account to consume another 15 minutes. This might not work for power, since there's physical infrastructure that would have to be cut over, but it would work just fine for a very large number of other services. The service provider is going to pretty quickly generate some fraud prevention strategy to prevent you from doing that, and now we've reinvented credit requirements for market participation.

[thedancollins]

Yes, you have paper money in your possession that is only worth as much as a centralized bank SAYS it is. And the awesome thing about that is that centralized banks never print ridiculous amounts of money and devalue their own currencies. That would be crazy and short-sighted. What sort of idiots would do that?

Crytpocurrencies are useful to people for a variety of reasons. And if a bank wants to deal in crytpocurrency, that is fine with me. I am glad that you have no doubt they will be profitable but you are pulling such sentiment out of thin air. There is not a precedent for cryptocurrency and how it may affect and integrate with existing systems. But consider that if you consider having a bank involved is a good thing for cryptocurrency - you might not understand the point of blockchain.

And the final point, the ledger is open, and everyone can see everything. You must consider this aspect in your scenario. I would imagine such a microtransactions agreement manifested into a smart contract or if not, prepaid. But again, only at a 15 minute. There is a level of credit there but still much smaller than 30 days worth.

[vec]

> Yes, you have paper money in your possession that is only worth as much as a centralized bank SAYS it is...

Do you really want to bring volatility into this? Because in the real world fiats are orders of magnitude more stable than cryptos.

Besides, that's tangential to why people prefer banks to cash. If the Federal Reserve screws up and tanks the dollar I'm just as screwed regardless of whether my money's in a dollar-denominated bank account or a suitcase under my bed. Why do you think the vast majority of people prefer to keep their dollars in the bank instead of the suitcase?

> I am glad that you have no doubt they will be profitable but you are pulling such sentiment out of thin air.

I'm pulling that sentiment out of a basic understanding of a bank's business model and value proposition, neither of which are actually directly related to the underlying currency. We had banks with metal-backed currencies, we have them with fiats, and we're starting to see them with cryptos. Unless you can somehow convince me that Coinbase isn't a bank.

> And the final point, the ledger is open, and everyone can see everything.

Right, I can see that three dozen pseudonymous wallets owe me for 15 minutes of service each.

Anyway, the whole point of credit is I can't actually pay up today, but there's reason to believe I will be able to in 30 days. Or 6 months. Or 10 years.

[thedancollins]

>Because in the real world fiats are orders of magnitude more stable than cryptos.

Yes, but if you'll allow me a little latitude - the fiat currency is under centralized control. And in that case is remarkably stable - until it is not. And 2008 happens. Blockchain is decentralized and yes, volatile. But fiat currency is FALSELY stable - it is engineered to be stable by a centralized authority that does not understand what it is doing and the machinations are generating an increasingly problematic economic environment. I can't stress this enough - the stability that is trumpeted as such a wonderful aspect of fiat currency is manufactured and at the whim of fools.

And absolutely, point taken about banks. I do not fully appreciate the role of centralized banking and certainly, few do. I should qualify some of my statements with the idea that banking is an option, but not a necessity. and that optionality certainly applies to the marble facade we see all over the American landscape.

And finally, yes, you can setup as many accounts as you like - and that behavior will be partially obfuscated because those IDs do not have to be linked. But if you would please give me a modicum of credit (pun intended) - the smart contract would likely require its own level of background on any given ID. If shenanigans are present - the ID is not permitted access to the transaction. Or it might not care - I guess it would depend on the potential exposure. Trivial problems have trivial solutions. There are much bigger problems that would need to be tackled. Thoughts?

[vec]

> is remarkably stable - until it is not

I think we're saying mostly the same thing, just with slightly different framing.

We have one mechanism for maintaining a stable store of value (centrally managed fiat) that in practice seems to work well most of the time but periodically experiences catastrophic failures. We have another mechanism for maintaining a stable store of value (crypto markets) where catastrophic failure appears to be standard operating procedure. The first is far from ideal, for all the reasons you mention and many more, but from where I'm sitting it still seems like the lesser of two evils.

Also worth noting that central banks predate fiat currency. Back when currencies were metal-backed governments would hoard or release metal to try and control the market value. That's what Fort Knox is for. It didn't work as well as in fiat-world, because there are bounds to how much metal you can actually manage to store, but it worked well enough. It'll still work well enough when the Fed has a Strategic Bitcoin Reserve that they can manipulate the market with.

> the smart contract would likely require its own level of background on any given ID

Oh, yeah, no halfway competent vendor is going to allow themselves to get scammed like this. And the technical solutions are pretty obvious. My whole point, though, is that we're almost immediately reinventing credit requirements for market participation.

-----

There are a lot of people making starry eyed predictions for exciting new developments that a crypto-based economy would allow to happen, but when you dig into the details the vast majority of those things are just as feasible under a halfway decent centrally-managed ACH system. There are also a lot of people joyously awaiting the collapse of large sectors of the financial system, but again when you dig into the details most of those sectors exist to solve problems and meet needs that are still present on a blockchain.

We've been through half a dozen currency transitions over the past few centuries. From precious metal coins to private scrip backed by precious metal to government scrip backed by precious metal to government scrip backed by fiat to paper transaction logging (checks) to electronic transaction logging (ACH), and the financial sector has not only survived but embraced the infrastructure shift every time.

Don't get me wrong, I've got my fair share of complaints about the modern financial system. But for good or ill I just don't see a fiat to crypto transition having anything close the apocalyptic effects that HN, collectively, seems to expect.

[thedancollins]

Sorry it took me so long to get back to you. Yes, the breathless proclamations of blockchain Armageddon (or Paradise) are tiring. I agree. And it is part of my souring on the whole topic. There is potential for something like blockchain to make a radical impact. But you know how it is - freedom is wonderful but it comes at the cost of diligence. And banks are just so freaking comfy. And they seem to demand so little of us.

The idea of the government creating a Strategic Bitcoin Reserve is interesting. You are right, whatever the current players can do to control any new financial instruments they will. I suppose the libertarian response to such an action on such a chain would be to abandon the chain. And I am WAY out over my skis here but there is a drastic difference between the money printing that is happening in America as opposed to the American govt attaching its keys to a large amount of a cryptocurrency. If they did that and did not transact with that coin then they could have a marked impact on the coin's liquidity and that would affect its value. It could also impact the transactability as fewer and fewer people would be active on that blockchain. But I keep coming back to the true difference being transparency and not being under centralized control as being the POTENTIAL game changers. I am not sure the populace has the stomach for such responsibility. Heck, I am not sure I do.