Heartened to see Taleb taking a skeptical stance on Bitcoin and crypto - last time I looked into it he was a proponent due to its decentralization and existence outside the monoculture of mainstream finance.
The sooner we can move past these staggeringly inefficient environment-destroying pump-and-dump schemes the better off we'll all be.
Something can be overvalued without being worthless. Also, the environment argument is inconclusive. Using a lot of power isn't the problem, it is how the power was generated and whether or not it was excess capacity
Even if the electricity were 100% generated by wind farms and solar panels, what a colossal waste of it - rather than helping humanity it goes to feed racks of millions of red hot machines to solve useless hash puzzles all day.
It's like feeding vast amounts of wood into an ever growing fleet of steam engines that just travel in circles all day, and once every 10 minutes one of the trains throws off a piece of gravel or a paint chip that humanity has decided has incredible value due to how hard it was to obtain.
Some whataboutism .. individual people expend energy for countless things that are useless or even harmful to many others. Most people in the west are totally egoistic when it comes to the sheer amount of energy/resources they use/consume.
> "... what a colossal waste."
Compared to all this, the energy/environmental footprint of bitcoin is laughably tiny.
IMO bitcoin does indeed have the potential of solving a global problem (not easily manipulatable reserve currency) .. that'd be a political/economic benefit that would justify a non trivial expenditure of resources.
We'll see in the future whether it can come true. The experiment itself appears already useful to me. More useful than many other things humans have done.
Yeah, totally subjective.
In this case using a lot of power is the problem since the network's power consumption does not increase the performance or capacity of the network - using excess capacity to mine bitcoin is actually worse than doing nothing with it because it contributes to a difficulty increase which makes the entire network more expensive.
Arguing that some hyped things don’t suck is not very helpful. I think it’s better to focus on particular qualities and try to move to the right price.
The best analysis I read years ago was predicting present value based on expected future transaction fees. That’s the only basis I saw that made sense and were like 1000000x past that valuation.
It's also about the systems it's replacing, which all the careful studies I've seen have rated as even less efficient. It also doesn't take into account future improvements in energy efficiency, which in the case of Ethereum are near and profound.
Bitcoin and all proof of work systems can barely replace the transaction processing of a small bank, nevermind all of the other operations, while consuming more energy than many entire countries.
El Salvador is the example that proves you wrong. They are using Lightning Network on top of Bitcoin to scale to enormous transaction volume - enough to run an entire country with plenty of room to spare.
Proof of work pays for network security, not Tx volume - the most secure super-computer ever invented.
Transaction processing is a free side-benefit.
With Lightning, TX Processing scales to meet any arbitrary needs.
How many people are actually using Lightning network in El Salvador at the moment? Also, isn't using Lightning Network over Bitcoin essentially equivalent to using Visa's payment network over the traditional banking system - i.e. a completely separate system, with entriely different trust characteristics and entriely different trusted entities?
People using LN are not transacting using Bitcoin. They are denominating their transactions in Bitcoin, and trusting LN to eventually convert to Bitcoin (at the huge bitcoin transaction cost) if/when they eventually need it. Even worse, most people will not use LN directly, they will use yet another third party, one that will operate a bitcoin wallet and LN channel for them (likely the same wallet and channel for many, many different people).
El Salvador could be the example but it’s far from proven. It definitely shows that Bitcoin really doesn’t scale: getting remotely competitive speed and cost requires giving up the decentralization vision and using Lightning network companies which are banks in all but name.
And so what? I haven't watched his talk, but by the summary of it it seems like his talk was consistent with his previous statements. Did Snowden destroy his credibility when he "shared the stage" with the scammer in this video?
It seems to me that the only thing that matters in most of the "crypto community" is that you are contributing to the price going up. When Musk took away the ability to pay with bitcoins the hate for him in every crypto subreddit went through the roof. No one gave a shit about his reasoning. I have a feeling the hate for Taleb is the same, he is not contributing to the price of bitcoin going up, so he is hated by those who have invested in crypto.
Could you be more specific on how he has "destroyed his credibility", is it simply because he is negative towards crypto?
Presumably Taleb wasn't showing up at the conference to promote and profit from whatever Craig Wright is doing these days, rather he was there to throw cold water on the entire crypto industry, so I don't think the indictment you mention really applies.
So you are actually saying that the reason that Taleb has "destroyed his credibility" is that he shared a stage with Craig Wright, it has nothing to do with anything he has said?
I've been following Taleb for years. I generally like abrasive style and his calling out of intellectual class. But some of his personal attacks on Bitcoin supporters is a little over the top.
From Twitter:
> [Peter McCormack] Would you discuss your findings in this paper with me. I’d like to explain to you why I think you are wrong. I believe this paper is not objective, rather written from a position of wanting to confirm your recent anti-Bitcoin position.
> [Taleb] Listen, fucking idiot. Go write your own rebuttal. The only good thing your amoeba brain is good at is in harassing mobs, intimidating innocent people who have a different opinion, pushing them to close their twitter accts. So stay quiet on my thread and keep your mouth shut.
I get that he doesn't want to engage in someone on a non-technical level or dumb down his argument, but these exchanges are off-putting. I haven't seem him express such consistent direct vitriol to others he considers fraudsters (central bankers, economists, pop-pyschology authors, journalists, etc). It's just weird that he's been going on a months long rage against people that invest their own money in something they believe in.
His paper might address this, but it seems like support for crypto to be a rather innocuous interest.
Peter McCormack could start by providing evidence for why the paper was wrong, instead was trying to bait Taleb into a Twitter thread that would have done no good to anyone. Good thing for Taleb that he didn't engage.
Thinking cryptocurrencies are a scam and then sharing a stage with Craig Wright at his own project's conference (after being warned by many people ahead of time) is a little like thinking Trumpism is a scam and then speaking at a QAnon conference.
It's just a completely nonsensical and baffling thing to do. As someone who generally likes Taleb, it made absolutely no sense to me. Craig Wright is essentially the most archetypal and most egregious cryptocurrency scammer in history, to the point of absurdity, and basically leads a Q-like cult full of delusional followers.
It's not about being negative towards cryptocurrencies. It's the completely contradictory behavior.
That said, Bitcoin is almost purely based consensus reality for most of its existence. It is worth something because others feel it is worth something.
I totally agree with Taleb, as any reasonable technical guy around here that is not interested in making a quick buck through a Ponzi scheme. Sorry, for some of them is more than a quick buck, but a day job.
I’m pleased that Taleb doesn’t want to own bitcoin. He’s a millionaire already, and he already has a bank account for a long time, and enjoyed US dominance for all his life. Meanwhile finally El Salvadorian US immigrants will able to pay the rent and food for their parents stuck in El Salvador without a 20% markup 3 months for now.
I understand the money transfer problem. Cryptocurrency seems like a good idea in that case.
I question though why choose Bitcoin? I guess a lot of people support it. But it is far from stable, so no one in the right mind, especially poor people should hold significant Bitcoins because it is speculative rather than stable.
I guess stable coins do not have the wide acceptance that bitcoin has? Why not USDC or similar to solve the money transfer problem?
Your respond suggest that Bitcoin is going to the moon, but that suggests you want it to stay the speculative instrument it is now. But if it is going to work in El Salvador you want it to be stable no?
USDC is controlled by US, which has been playing geopolitical games with El Salvador (and other countries) already.
People El Salvador didn't get the $1200 checks that US citizens got from printing more USD, even though they both use USD in theory. The president tried to get a deal with the IMF, but they couldn't agree on the terms, so he decided to give a choice to the people between a safe but inflating currency and a volatile / experimental but deflating currency.
Luckily there are enough market makers in both countries that transferring USD and recieving USD through the Bitcoin / Lightning network is cheaper and faster than using the traditional banking infrastructure.
I have a girlfriend in Colombia, and in addition to the 10% remittance fee she always has to go to the city from her village (1 hour bus ride) just to get money. I wish I could just send her money through Lightning network (she has internet + iPhone, so installing an app is not a problem).
The rest of your comment makes sense, but this sentence is disconnected from reality:
"People El Salvador didn't get the $1200 checks that US citizens got from printing more USD, even though they both use USD in theory."
Are you seriously saying that 5% inflation a year, maybe a bit more worse case, is bad compared to Bitcoin just lost 40% of its value in the last 2 months? Oh no, better not use USD then and switch to Bitcoin!
Maybe we need a stable coin that is a mix of the major currencies if you are against USD in particular? It could be pegged to some ratio of Chinese, US, Euro (and UK or Japanese?) dollars? This would be quite nice and stable.
As most Bitcoin advocates would say Zoom Out. Yes Bitcoin looks volatile if you look at the past 2-3 months. However if you zoom out to 1 year Bitcoin is still up almost 300% y/y. Zoom out 2-3 years and the numbers look even better. As for USD, depending on what you want to buy inflation is 3-30% y/y - think asset price inflation.
Zoom out further and USD looks even less attractive as a store of value. In 1933 $20usd bought 1oz of gold. Today it would take $2000usd/oz of gold, netting out to a 100x decrease in purchasing power in ~90 years. Bitcoin meanwhile has grown in purchasing power by 200% per year on average since inception.
What El Salvador has done is brilliant.
Citizens can chose between a short-term stable unit of account that loses most of its value over a long time period (USD) or a short-term volatile but long term deflationary currency designed to increase purchasing power over the long-term (BTC).
Remember that no traditional bank in the world will ever again pay you sufficient interest on savings to preserve your purchasing power over time - not one. Fiat is a terrible long-term store of value.
>As most Bitcoin advocates would say Zoom Out. Yes Bitcoin looks volatile if you look at the past 2-3 months. However if you zoom out to 1 year Bitcoin is still up almost 300% y/y.
Either you don't understand what volatility means, or you think volatility only matters when it's towards the down position. Either way, you're wrong.
Volatility in a currency is not a good thing. Even if some people are making money, other people are losing money due to the volatility. Value stability should be one of the top goals for any currency.
The point of a fiat is that it slowly loses value, so wealth holders can't get bigger and bigger just by holding the fiat, they are forced to invest to break even.
Bitcoin is not "fixing" anything here, a currency that deflates forever is a dumb idea.
5% inflation a year (which is closer to 20% for people who want to own their own house) is devastating long term.
People in the US can just buy S&P stock in their 401K to defend against it, but most people in the world don't have that privilege.
I agree that volatility of bitcoin is really hard to stomach (I have been through 85% downturns and it sucked, and people have made fun of me many times, I just got used to it). But there are enough people who have so bad pension systems in the world, that they see the huge volatility of bitcoin as a better option than trusting their government.
Network effects. No better option which is universally agreed as the _next_ best option. It will get easier and faster to send. Email used to need a C compiler and 2 days to send.
No it isn't. When I'm sending money to Colombia and WorldRemit app takes 10% of my money, it means 10% less food to cook for my girlfriend and her family. She can't get a job since the pandemic, and I have other friends in Colombia with the same problem, they are desperate... some times I just send $40, and they say that it saves their life, it's so bad there right now.
Money is a just a row in an SQL table. We can update it for less than a cent. Everything else is a social problem, Bitcoin does nothing to help here. Exchanges over Bitcoin are no better or worse in principle than existing financial infrastructure.
The reason for high fees are the risk in sending the money across borders. Due to fraud there are risks. Bitcoin does nothing to fix this and seems to even enable more scams.
> The reason for high fees are the risk in sending the money across borders. Due to fraud there are risks. Bitcoin does nothing to fix this and seems to even enable more scams.
Bitcoin eliminates counter party risk and international transfer risk. Lightning eliminates cost, latency and transaction volume limits. In every way that matters, Bitcoin via Lightning eliminates high fees and addresses all your concerns.
As for the idea that Bitcoin enables more scams, please provide citations. I am not aware of any scams introduced by Bitcoin or Lightning.
> Exchanges over Bitcoin are no better or worse in principle than existing financial infrastructure.
In principal maybe not but in reality, Bitcoin for international exchanges is a game-changer especially if you can keep the money in Bitcoin and spend it as the recipient.
Fees on remittances to El Salvador were up to 50% in some cases. With Bitcoin they are effectively zero.
If you are sending 40$ over Bitcoin the fees will
Be far more than 10% (4$). Checkout Nano or Stellar Lumens if you want to send small amounts of money without fees.
Sad state of affairs with bitcoiners pretending to care about El Salvadorans - a country most did not know existed a month ago and could still not point out on a map - in an increasingly desperate attempt to make number go back up.
Buy some dollar would have been awesome advice after Bretton Woods and pretty much up until now. Now we will have a new world currency. The dollar had a good run but it has pumped as far as it can go now on money printing.
It's a very utopian idea though, isn't it? What government is going to settle for a currency that's out of their control, that doesn't allow them to collect taxes efficiently?
I'm not really for or against crypto in general. But I do like my bins being collected, and my roads without holes in them - it kind of requires some kind of central governing for this to happen.
It'll take another 10-20 years or so, until we likely have sound evidence, whether the conclusion drawn from modern monetary theory - that forever growing national debt is not in itself a problem - is reasonable or not.
Either we'll see that there's no problematic level of inflation or we'll see that there is too much inflation causing instability.
If somehow the evidence suggests that growing national debt is indeed a fundamental problem, then maybe some governments will be forced (by voters' will or by peer pressure) to ...
> ... settle for a currency that's out of their control ...
... because it'd remove the ever present temptation for politicians to promise short term gifts to voters that are paid for by devaluation of the currency and by shifting payback into the future.
In Ethereum, the currency’s role is of secondary importance. Instead, it’s intended to primarily be in the service of the “world computer”. You’d acquire Ether for its value as an asset rather than a currency.*
But even so, would you say it’s stupid to advise a Turk to buy dollars? These past few years, many of them have been exchanging lira for dollars as protection against inflation.
*In practice, the network is struggling to find a true application, and Ether’s utility as a currency is low.
I meant generally advise, like to tell a whole forum of strangers to do it.
And even advising a Turk to buy dollars would depend heavily on the Turk’s particular situation and would likely mean not buying dollars as an investment but as a hedge against other things.
There seems to be a real under-appreciation by the Hacker News crowd of how profound the use case of cryptocurrencies as simple money is.
Perhaps because we have a sample bias towards people who are served adequately by traditional financial infrastructure, and people who are disproportionately preoccupied with blockchain as a potential component of software systems.
As an example, most kids in starting school today will probably have years of experience being their own banker, using apps on their phones, before they ever step foot in place which employs bankers. At that point they may not bother, since the cryptocurrency ecosystem will already provide all the same facilities. This is profoundly disruptive.
Alternatively, people who are good at analyzing systems and have a sense of ethics refuse to promote a faulty narrative even if they could personally profit from pumping and dumping.
For example, the disruptive experience you describe happens to statistically nobody. The kids you describe are not being their own bankers - almost all of them are using credit card-backed apps, and even if you only look at the few who use cryptocurrencies at all there’s a very small percentage who aren’t reliant on exchanges which are banks for all intents and purposes.
No one is using crypto out of choice for payments. The gigantic transaction fees alone would deter any sane person from using something like bitcoin, and other coins are even less reputable.
The only reasons to use crypto are either for speculation, or for trade where traditional networks can't be used - illegal activities, transfer to/from certain countries.
Here's a contemporary example: We can, right now, hold USD equivalents in kava.io . It operates on a system which is analogous to fractional reserve banking, except with no middlemen, so your effective interest rate is better by an order of magnitude. It's relatively simple to use. Giving a bank your trust a and a big cut of your returns is going to be a hard sell when that's your normal as a kid.
Terrible comparison, you do know that banks are regulated and insured by the FDIC right? If a bank goes insolvent, your savings will be insured up to USD100,000, but if kava.io goes down (and trust me it will), there goes all your savings.
The sooner we can move past these staggeringly inefficient environment-destroying pump-and-dump schemes the better off we'll all be.