| HN Mirror

Sure, it's more an observation of the mechanics underpinning cryptocurrencies. My statement was actually incorrect in that there are not actually "issuers" per se in crypto and that can be a problem.

Cryptocurrencies like BTC, ETH and whatever else are not "money" in the sense that we generally understand. This money is either a credit on a commercial bank or a credit on a central bank. These entities are responsible for managing the liquidity and solvency of their balance sheet such that the credit you hold retains value (Yes, I know there is inflation but that's an orthogonal concern, I would argue). There is a governance and legal framework underpinning how money works in this "mundane World". Everything in the mundane world is a legal agreement. Financial agreements are always someone's liability and that's a good thing because someone is always accountable if something goes wrong.

Cryptocurrency behaves more like some kind of synthetic commodity. By that I mean that it inherently has no value and has no use for anything other than being a "token". When cryptocurrency is created, it has no issuer. There's no accepted legal framework or explicit governance framework for holding people accountable if something goes wrong (other than code is law) and things go wrong all the time. There are rug pulls, exchange rate crashes and project failures are ten a penny etc... and this is all happening while the crypto world is in a mega bull market! What happens when the next bear market comes around? All the projects that _seem_ viable now will suddenly become unviable. All the debt positions collateralised with sketchy crypto will unwind en masse. I suspect the tokens for many projects out there will trade close to zero. People who invested in various projects from algo stablecoins to lending protocols will suddenly find that they hold worthless tokens with zero recourse. By this point the insiders would have exited into BTC/ETH/fiat ready to start the next round of "projects".

Maybe this is OK. I mean, it is what it is and clearly some people are fine with that. I think we can do better though. That's why I'm interested in credit based monetary systems because reputation is a key part, so participants are accountable for their actions. This is fundamental for any significant real world adoption. Furthermore, credit based instruments do have intrinsic value which is a function of issuer credit risk. Such instruments are more stable than "synthetic commodities" and have more utility for real world uses.

Having said all that. I work in the crypto world and quite enjoy it. I just don't think it's as good as some would have you believe.