The Problem with Cryptocurrencies...?
14 2017-11-27 by DereIzNoPoint
Firstly I have to say I'm not an expert on cryptocurrencies, far from it. I just ask questions to clarify my understanding of them and economics more broadly. I put this in /r/conspiracy because a lot of these crypto people seem to be too optomistic about it, and seem to believe governments will eventually adopt digital currencies for the benefit of their citizens (people like Antonopoulos).
Now a common criticism I hear of cryptos, particularly Bitcoin (since that's the best known), is that they're a 'Ponzi scheme', and that they're based only on faith. Well, aren't fiat currencies based only on faith? Everyone just accepts money has value because our government says so; is that really better than the faith people have in cryptos? Even diamonds are only valuable mainly because we believe them to be valuable; is that not so? Yes they have some uses, but their price is justified mainly through our belief they're worth that much. Bitcoin has uses too, but it's price is mainly from the faith in it.
So I don't put much value on such criticisms of cryptos. To me the actual problem with cryptos is that the people who run the world will eventually clamp down on it. We know that the world pretty much runs on keeping the fiat currency scheme going on forever. All wars are fought for the money system controlled by private central banks. Print more money out of nothing and charge interest on it, thus keeping people enslaved to debt they can never pay off forever. Literally everything governments and the-powers-that-be do is to keep this system going. Why would they allow currencies to exist outside of their control? They destroyed Libya exactly because they controlled their own currency for the benefit of their citizens.
So if cryptos are genuinely outside of this scheme of paper money, then eventually they will want to destroy it or bring it under their control. I'm pretty sure this is the ultimate goal; I seriously doubt government or banks will eventually adopt cryptos in order to help the ordinary man in the street. For example, if all governments (through a declaration from the IBS, or whatever the relevant authority is) declare cryptos are illegal, what are you going to do with yours? You won't be able to legally convert them into assets or fiat currencies; then what? You'll lose everything you put into them.
Is this a reasonable concern, or not?
EDIT: I'm not so much interested in the technical details of cryptos, e.g. whether they're assets or currencies, etc., I'm more concerned about whether banks and governments will try to clamp down on them or not.
53 comments
1 RMFN 2017-11-27
I don't know why they call it a currency of it doesn't buy anything.
1 DereIzNoPoint 2017-11-27
More and more places are accepting Bitcoin as payment. But at any rate, for now you can relatively easily convert bitcoin into fiat currency.
1 sirio2012 2017-11-27
A little off topic but how does one acquire said "currency" such as bitcoin. Only thing I know about them is you used to be able to mine them (unsure what that is either).
1 DereIzNoPoint 2017-11-27
First you have to get a wallet. Then you have to either buy Bitcoin through an exchange.
I personally haven't put any money into cryptos, I feel I need to read more about them before getting into it.
1 king_gidorah 2017-11-27
...or, the question I keep asking myself...what happens when they announce a quantum computer that can break all current crypto-currency encryption in hours or minutes?
1 daneelr_olivaw 2017-11-27
At the moment, it supposedly costs (31B dollars)[https://m.youtube.com/watch?v=J-Vjgx75GXQ] to fake one bitcoin, I don't think we're quite there yet.
1 king_gidorah 2017-11-27
No...but Moores Law is tenacious
1 choufleur47 2017-11-27
It actually been dead for a while. There are physics related limits.
1 statusquowarrior 2017-11-27
There are cryptographic systems that are quantum proof already.
1 Ophites 2017-11-27
Like what?
1 statusquowarrior 2017-11-27
Lamport signatures, which can be implemented in Ethereum.
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1 Ophites 2017-11-27
It would be minutes or instantaneous.
1 groman31 2017-11-27
It's not a matter of faith. The US government creates the fundamental demand for dollars (over bitcoins or other currencies) by only accepting taxes in it.
https://en.wikipedia.org/wiki/Modern_Monetary_Theory
1 DereIzNoPoint 2017-11-27
So not faith, but coersion? And what do you think of my fundamental criticism of cryptos, that eventually governments will either destroy them or bring them under their control, is that a legitimate fear or not?
1 groman31 2017-11-27
Yes, but coersion is the basis of all property so it doesn't really bug me when it comes to dollars.
Cryptocurrencies don't threaten the governments. That's just them marketing themselves as rebellious or edgy lifestyle choices.
Cryptocurrencies might help make tax evasion, money laundering, or other crimes easier...but governments will eventually find ways to detect the behavior and prosecute it all the same.
1 DereIzNoPoint 2017-11-27
Well, my point exactly. Governments will eventually want more control over cryptos, for whatever reasons.
1 groman31 2017-11-27
I don't think they'll care so much about control over the cryptos themselves, so much as just detecting and prosecuting crimes committed with them.
1 Targuil 2017-11-27
Cryptos themselves are not treated as income and by themselves are not taxed. Only when you trade them to something taxable, the income may be taxed.
1 groman31 2017-11-27
In other words, the moment you try to use them as though they were a currency, they become taxable.
1 spacelord_rasputin 2017-11-27
Yep, it's fucked. The IRS currently considers cryptocurrency property and not 'real' currency for tax purposes. If you bought bitcoin a year ago and use some of it to buy something worth $5 today, you have technically made a long-term capital gain, which you must report to the IRS, and for which you would owe 15% or about $0.40 in tax. Even worse, if you bought bitcoin less than a year ago, you will have made a short-term capital gain and, assuming you make more than about $40k/yr, owe an even greater percentage (if you make less than that you'd actually pay less however). Being paid in cryptocurrency is similarly subject to short-term capital gains tax.
I should note however, that buying cryptocurrency or trading one cryptocurrency for another does not (to my knowledge) incur a tax liability.
1 spacelord_rasputin 2017-11-27
As I mentioned in my reply to /u/groman31 , cryptocurrencies are considered property by the IRS. Any exchange of crypto for goods or services including USD, but excluding like assets (i.e. other cryptocurrency) is subject to capital gains tax.
1 Hermaphrotitties 2017-11-27
I can walk into any store and exchange petrodollars for goods and services. This is what is meant by faith, not a blind trust that the vallue of a commodity will remain relatively stable. Crypto is a de facto commodity, not a currency.
1 DereIzNoPoint 2017-11-27
Why is it a commodity?
1 mastigia 2017-11-27
Here is what google says a commodity is:
Not saying the guy is totally wrong, but I don't see it. Maybe it isn't a fully exchangeable currency yet, but it isn't a commodity by that definition. It is more like Euros in the US. You can't exchange it everywhere, but it is still recognized as a currency.
1 Hermaphrotitties 2017-11-27
The blocks of crypto are being bought and sold as financial instruments, which are by definition commodities.
1 mastigia 2017-11-27
That makes any currency that is traded in such a way a commodity.
1 Hermaphrotitties 2017-11-27
Yes, it is a commodity when it isn't being used as currency ... crypto is not being used as currency.
1 mastigia 2017-11-27
I buy things with crypto all the time.
1 Hermaphrotitties 2017-11-27
I buy things with favors all the time, don't make it a currency.
1 mastigia 2017-11-27
This is getting obtuse. Have a nice day man.
1 Hermaphrotitties 2017-11-27
Cheers broham
1 capitolshill 2017-11-27
It's a reasonable concern, and one that I share. If cryptocurrencies really are a viable threat to the current banking system, then why have the been permitted? A fully digital currency is every government's wet dream- no more tax evasion, full economic control, protection from counterfiet opearations. Banks don't care about what form currency takes, so long as they're getting their share of the power.
I've asked before, that if there was a major collapse of the banking and finance system, how could one ensure they'll have reasonable access to their digital wallets when they need it? How can you be sure the exchanges will function as intended?
I can't help but think cryptocurrecies are just a test-run on a government controlled digitial currency. And how do you get the people most likley to distrust that system on board? Make them early-adopters
1 Wubzwubz 2017-11-27
Cryprocurrencies will be the go to currency if the current financial system collapses. Cross your fingers
1 DereIzNoPoint 2017-11-27
You expressed it better than I can. If cryptos really are outside the paper money system, and give the users control over their money, why wouldn't governments and the banks want to control them or shut them down?
Conversely, if the banks and governments leave them alone, what does that really say about cryptos? Are they as fantastic and valuable as they have been portayed?
1 Pologrounds 2017-11-27
Banks have invested heavily into crypto. That's the rub.
1 rootone 2017-11-27
Please go and do some research before pontificating about the role and future of crypto assets.
Crypto assets (currencies) are by design censorship-resistant. No one or government can turn them off.
That being said, there have been massive efforts to take control of Bitcoin by attempting to get people to agree to a new/modified source code. This is known as a "fork" in the coin. The most recent Segwit 2x hard-fork is a glaring example of this.
Crypto-currencies offer a lot of value to populations underserved by financial institutions--sending money overseas, investing, storing assetts. They do not currently have a strong value proposition for replacing government backed fiat in developed countries.
But they are in infancy and growing and no one knows how this will play out. However, modification of financial systems in the form of Germany's move to unbacked fiat after WW1, to print money to pay war debts, ultimately lead to a populist uprising, Hitler, and WW2. We are primed for a global financial overhaul, hopefully it's more peaceful.
1 DereIzNoPoint 2017-11-27
I never said anything about 'turning them off'. I said, what if all governments declare them illegal? So you can't purchase assets or fiat currencies legally with cryptos? Then what? Cryptos only have value when you convert them into actual assets.
1 BandyBanana 2017-11-27
you missing it. If they clamped down on the present crytos then people will flock elsewhere and drive the price higher and lower.
The point? People want a free market, and they have a taste of it in the form of bitcoin, they will never stop. Globalists have lost the power now to control the entire world so there will be countries that can exchange whatever crytos for whatever value ...
1 Mrexreturns 2017-11-27
Cryptos are basically making money out of nothing, so if faith for them collapses, they collapse and the economy is destroyed from the inside out.
1 Fecalityy 2017-11-27
So basically just like every other currency in use right now?
1 Mrexreturns 2017-11-27
Cryptocurrency is even worse because it has nothing behind it.
1 Fecalityy 2017-11-27
True. What bothers me is what's stopping these megabankers from going in and buying most of the bit coin? I man these people have more money then you think.. they could totally do it
1 Workmask 2017-11-27
Neither does a USD Federal Reserve Note.
1 DrProtic 2017-11-27
It's not making money out of nothing, don't guide others into ignorance.
1 deerkiller201 2017-11-27
I'm no expert but Bitcoin stinks of bubble. Everything I hear from those who are already invested sounds far far too good to be true
1 GnosisRex 2017-11-27
Banks more and more control the mainstream crypto narrative, turning it into a store of value rather than a unit of exchange. Just look at BTC, the most prominent sellout coin. Its investors no longer care about decentralized or egalitarian ideals. They mostly seek huge returns to bolster their personal stores of wealth.
The cypherpunk community has largely moved on to other projects, but each of them will have to deal with the profound corrupting influence of huge outsider investment, and how long can an idealist resist their own repressed greed?
I still have hope for crypto to fulfill its ideals, but it is balanced by an equal amount of doubt.
1 Dressupthrowaway 2017-11-27
What really bothers me about bitcoin is, as much as people talk about the anonymity of it and the decentralization and whatever we still don't know who is behind it. Who is nakamoto? I dunno if just smells a little fishy to me and I was all about it years ago I thought it was great.
1 eaazzy_13 2017-11-27
I️ agree that his/her/it’s hidden identity is strange and off-putting. But if it’s anonymity you’re after, I️t doesn’t get more anonymous than a popular, valuable currency whose creator even remained anonymous.
1 ubervongoober 2017-11-27
You won't be able to legally convert them into assets or fiat currencies; then what? You'll lose everything you put into them.
Thy can shut down the bitcoin ATM's and exchanges but thats far from the only way to get a bitcoin. My first bitcoin purchase was meeting a guy in a coffee shop from local bitcoins. Stopping that is like trying to stop someone selling dimebags or prostitutes. I can send western union to to a country where it's legal and buy bitcoins, there is a limit below 1000 dollars or 500 where you don't even have to show ID to send it. Stopping it now is impossible. What they will crack down on is undeclared taxable income, that will for sure happen.
1 vwrage 2017-11-27
The problem?
You cant feed your family on crypto currency. If the power goes out, you'll be wishing you bought survival books, seed vaults, gear and water filters.
Anyone promoting crypto is an idiot, you cannot create value out of nothing, digital currency will enslave people and they will cheer for it because of the shiny.
1 eaazzy_13 2017-11-27
I️ made more than $600k from BTC this year alone, off of an initial investment of a few hundred. My family is fed well Promoting it is the smart thing to do, since the more people that buy BTC, the more valuable my share of BTC becomes.
1 vwrage 2017-11-27
That's nice.
1 eiseros07 2017-11-27
Crypto was invented by AI. It was written to be quantum proof.
1 Fecalityy 2017-11-27
So basically just like every other currency in use right now?
1 DrProtic 2017-11-27
It's not making money out of nothing, don't guide others into ignorance.