I’m seeing in the comments that there’s a lot of confusion about what cryptocurrency is and how it works. Let me say first that I’m very impressed. It is a rare and wonderful thing to hear someone say “I don’t know,” and even rarer online, but it makes for much better conversation.
Now a few more thoughts on the subject at hand:
Part of the reason that cryptocurrency is so mind-bending is the question of value. In other words, if the currency isn’t backed by a government (for example, US dollars) or tangible resources, how does it have real value or purchasing power? The unsatisfactory answer is that cryptocurrencies have value because people believe they do. (Much similar to the stock market.)
When people speculatively buy cryptocurrency, they are betting on the fact that people will continue to believe that cryptocurrencies have value. This is dangerous because, as the perceived value swings up and down, people who raced to buy when the price was high are left with tough cookies when the price drops.
For those who understood that buying cryptocurrency was a gamble, that’s a loss and part of the game. But in order for cryptocurrency to rise in value, it requires rising demand, in other words, more people buying crypto regardless of how well they understand it. The hype, the jargon (which bolsters the lie that that only smart and financially-savvy people “get” crypto), this all drives people who often know very little or nothing about cryptocurrency to buy it, thinking of it as an investment rather than a gamble. Often, these are people who can least afford to lose.
As I noted in my post this morning, we’re seeing a race between speculators who stand to gain billions by keeping the crypto arena unregulated and those who stand to lose. Without regulation, cryptocurrencies will leave people vulnerable to predatory practices. The government needs to step in before DC is completely captured by crypto-interests.
Another item in the long list of corruption that permeates this country. I wonder whether the crypto-lobbyists are secretly advising members of Congress and judges about crypto-deals that will enhance their personal wealth. The de facto religion of this country is money worship..
Interesting read. How do you plan on regulating the use of Bitcoin for ransomware? I work in cybersecurity and see ransomware attacks happen all of the time . If Bitcoin is "regulated", the bad guys will just use a different "unregulated" cryptocurrency. There are hundreds of cryptocurrencies today, I do not see how all these can be regulated. Maybe through the use of a cryptocurrency exchange but there will also always be shady oversees exchanges not based in the U.S. I do think that I big part of why cybercrime is so common is a.) you do not need to know much about computers to carry out a ransomware attack today and b.) poverty. I noticed that many of the people who are involved in cybercrime are from really poor countries. I think it is desperate circumstances that drive people to desperate means. As an example, Russia educated a large number of people in Engineering and Computer Science in the Cold War era. After the collapse of the Soviet Union these people were left without jobs but a technical skillset. This lead to many of them turning to cybercrime for an income. I can almost guarantee that if less people were living in poverty we would see less cybercrime. There are nation-state attackers that will always be there but I think poverty is a big part of it.
Yikes! as if there isn't enough corruption!? I can't wrap my head around the concept of crypto 'currency'. But things were bad enough without it. I hope people who understand this can keep up or even get ahead.
Our technology is outpacing our regulation of it. This is way beyond my field of expertise, but I am very wary of Cashpay and Bitcoin, etc. I foresee that this will be a problem in our economy if we don’t get a tight reign on it quickly. Those who are “in the know” will benefit and leave the rest of us behind. Just one more problem to add to our growing list of complex issues we must confront.
It reminds me of credit derivatives: ) --One of the most poorly kept secrets in Wall Street's empire of fraud was that credit default swaps were never anything but pretend-insurance.
The credit default swap market was a $60 trillion-plus paper Ponzi-scheme. The Wall Street syndicate claiming to "back" this insurance have nothing more than a few billions of dollars of liquidity apiece.
Given the magnitude of this fraud and the audacity of the perpetrators, this alone is reason enough to abolish the Wall Street fraud-factories, abolish the credit default swaps market, and indeed to abolish the entire derivatives market -- so that the banksters cannot perpetrate a similar crime again in the future.
Credit default swaps were banned in the U.S. for many decades, based upon anti-gambling statutes. However the CDS fraud itself only scratches the surface on the monstrous evil behind this scheme. As I have written about frequently in the past, the CDS fraud is a tool which the banksters have used to perpetrate an even greater crime: the sabotage and destruction of most of Europe's debt markets.
Here is how this particular Wall Street scam operates. First of all, the banksters pile on massive shorting with respect to the credit default swaps of a particular European debt-market. This drives the prices of credit default swaps sky-high.
Meanwhile, the banksters' accomplices in the mainstream media then perform their best impersonation of Chicken Little: "the sky is falling on Greece's economy." At this point the third partner of this illegitimate tag-team chimes in: the ratings agencies. Based on nothing more than changes in credit default swap prices and media rhetoric, the ratings agencies downgrade the debt of these Euro markets -- immediately driving interest rates higher.
This significantly raises the interest payments on these debtor economies, instantly making those economies less solvent. This is then followed by another shorting operation in the credit default swap market, more media rhetoric, and more bogus "downgrades.". And thus the perfect vicious-circle of crime is established.
Clearly what America needs is a new financial market wealthy investors can further enrich themselves without paying taxes. Robert, you're 110% CORRECT. The crypto market sucks ass.
I recall how Mega-fool Elon Musk used his Twitter acc't to destroy small bitcoin investors for his own personal kicks.
Wealthy people are always trying to figure out how to avoid paying taxes, despite the fact their wealth was created on public roads, public infrastructure and the backs of the working class. Disgusting how the wealthy try to create "something for nothing" while complaining about the middle class and poor receiving "something for nothing."
TIME: Two Things Crypto Investors Should Know About the Infrastructure Bill President Biden Signed
President Joe Biden signed a $1.2 trillion bipartisan infrastructure bill on Nov. 15 — and it includes some new legislation crypto investors should know about.
The new law will require brokers — aka cryptocurrency exchanges — to issue a 1099-B.
In other words, crypto exchanges will now be required to notify the IRS directly of crypto transactions. “The bill will signify the end of hiding many gains for many crypto investors,” says Grant Maddox, an independent CFP based in South Carolina.
This will in turn create tax reporting challenges for many crypto investors, Maddox says.
For investors who use their own crypto wallet, the information reported to the IRS on the 1099 form will be prone to inaccuracy since the exchanges reporting on trading activity will have a limited view into what these investors paid for crypto in the first place.
When cryptos first came out I saw the problems that would come from this. I looked at it through the eyes of an Internal Revenue Agent, who worked cases dealing with money laundering. We live in a point in time where money and power is god to many in this world.
In an "Office Hours" several days ago, I asked Mr Reich to comment on "Bitcoin" and the like. His short response at the time was that it's all a Ponzi hustle. He seems to have been planning a more in-depth response that I only anticipated within the context of that discussion. >This< is the response I was seeking.
As to the question:
"All of which raises the question: As the crypto congressional complex continues to grow, how much longer will lawmakers and regulators be able to rein crypto in?
What do you think?"
I don't think it could possibly happen in the current political climate through legislation. I think the only way it could possibly happen >in< this climate is for the DOD to focus on crypto-currencies as a national security threat, and dedicate a unit of their best assault hackers to insure they're aware of all actors in every crypto transaction they can access, and share any suspicious transactions with the appropriate domestic law enforcement agencies along with the IRS, as well as the CIA to investigate and keep abreast of any possible foreign hostile threats. Keep in mind I say that with fear and trepidation. I'm one of the original "who's gon'na protect us from who's gon'na protect us" types.
Then why - you may wonder - would I take such a position. Quite simply, I think crypto-currency is a far bigger problem than common wisdom may suggest, fraught with unintended consequences that few of us - if any - are equipped to imagine. Also, given that government >creates< the market in the first place, why would we permit antigovernmental, private sector forces to devise a market structure that serves their convenience? Why would we let the foxes rule the henhouse? I strongly urge those of us here who haven't already jumped on the crypto bandwagon, and who are either still mystified by or for whom "the jury is still out" on crypto, to think very carefully about this "new and revolutionary" way of doing business. I'd view it the same way anti-vaxxers view a proven defense against the covid. Those with a relatively reasonable and understandable view is that the covid vaccines haven't been around long enough to understand all the consequences of using it. I feel >just that way< about crypto. Not all innovation is an improvement. Not all change is for the best. The private sector is inherently, by definition, self-serving.
I am a (Norwegian) long-time fan, and signed up today mostly to add this comment. (and to support you)
Although I agree on the main intention of this post (that crypto needs regulation), it is cluttered with common misunderstandings I want to address. Because all in all, Bitcoin aids in what you believe in - equality for all. Which I will explain in this comment. It is crucial that well-meaning people with a massive reach like yourself, truly understand the benefits and mechanics of the financial system of the future.
"I should add that simply in order to exist, cryptocurrencies use astonishing amounts of electricity. (The process of creating Bitcoin to spend or trade consumes around 91 terawatt-hours of electricity annually, more than is used by Finland, a nation of about 5.5 million.)"
This is false. Cryptocurrencies that are built using Proof of Work do, but this is uncommon for new cryptocurrencies. Bitcoin is the legacy coin using this method, and the reason for doing so is to protect the network, and incentivize innovation on renewable energy. (Bitcoin power consumption is roughly half of gold mining, and half of powering the traditional banking system). It is important to differentiate between Bitcoin (BTC), and "cryptocurrencies"(anything else).
"Crypto campaign money is now flowing freely to members of Congress (some of it, presumably, in cryptocurrencies – but, who knows?) Congress’s “Blockchain Caucus” now counts 35 lawmakers as members."
Everything is permanently visible on the blockchain. And in the years to come, we will have the technology to easily see the entire origin of funds, as well as AI will be able to trace the flow of money. Transactions that might be impossible to trace now, might be easy to trace in just a few years. So anyone engaging in criminal activity using the blockchain, are likely to get caught in the near future.
Completely anonymous coins like Monero might need to get banned, as the potential to be used in criminal activity trumps most other use cases in my opinion. But Bitcoin transactions are quite transparent.
"Part of the reason that cryptocurrency is so mind-bending is the question of value. In other words, if the currency isn’t backed by a government (for example, US dollars) or tangible resources, how does it have real value or purchasing power? The unsatisfactory answer is that cryptocurrencies have value because people believe they do. (Much similar to the stock market.)"
This is the most important one. The question of value. Similar to how the stock market works, the price of cryptocurrencies goes up based on demand, and how many people believe in it. You compare it to the US dollar, claiming it is "backed by the government", and that is wha gives it value. But does it really? Holding US dollars is a guaranteed way of losing purchasing power.
Ever since Nixon took the US dollar of the gold standard, the differences in society started increasing at an alarming rate. The gap between salaries and productivity. Between rich and poor. And the reason is inflation.
The middle class and above, all have means of protecting themselves against inflation. And inflation is an invisible tax that is mostly paid by the poor.
People who can borrow money, have been able to borrow money with lower interest rates than the average yearly gains in the stock market. Meaning you can borrow $1m at 1.5% interest, and invest in the stock market for an average of 5-10% return. This means you should borrow as much as you possibly can, and invest it in the stock market to increase your wealth.
People living paycheck to paycheck are the ones who end up taking the bill for the wealthy. The purchasing power of their cash is deteriorating every day.
The prices of real estate are ALWAYS going up, regardless of an increase in demand of said property. Why is that? Money printing. Assets with actual value go up in price when money is printed. The value might still be the same, but the price is higher.
Where am I going with all of this?
Bitcoin is a means of fighting all of this. It represents an asset class available to everyone, without requirements. Where the rich might put their money in hedge funds to be less impacted by inflation, getting access to a hedge fund requires a lot of money. The middle class might have savings they invest in the stock market. The poor has none of these options. Except Bitcoin.
As a store of value, like gold, Bitcoin has been the best performing asset since its inception. It has consistently beat gold, stocks and hedge funds, and it requires nothing more than a free wallet to get started. And you can get started with just a few dollars. Anyone can save a few dollars worth of bitcoin every month and start building up their value. The unbanked can use Bitcoin. The poor can use Bitcoin. And the rich are already using Bitcoin.
In terms of energy consumption, Bitcoin mining can be done anywhere in the world. All you need is internet and electricity. Power plants can mine Bitcoin during the night for their excess power, and sell it the next day to offset costs for consumers.
We can set up solar power plants in the middle of the Sahara desert and mine green Bitcoin. Or on a volcano. Or a waterfall in the middle of nowhere. We can utilize green power where there are no people living, which traditionally has been a requirement for usefulness due to the transportation costs of power.
However, right now the crypto space is packed with frauds and scams. Memecoins that are ponzi schemes, worthless art NFTs being sold for millions, presumably for money laundering. And like you have accurately stated, the people who dont have money to lose are often the ones who do. It is the wild west in there right now, and it is hurting all of crypto.
There is no doubt we will be using some cryptocurrencies in the future. We will also be using NFT´s. But not like it currently stands, ridden with scams, manipulation, ponzis and money laundering.
Conclusion:
I wholeheartedly agree the crypto space are in dire need of regulation. But dont get them all mixed up. Bitcoin represents a unique opportunity to increase equality on a global scale. It might not be the payment method of the future. But it is a store of value available to anyone, that has outperformed hedge funds, gold, and the stock market ever since its inception.
It is also a means of storing and transporting energy in a sense, and incentivizes innovation for green energy.
Secondary conclusion:
It was Nixon taking USD off the gold standard that skyrocketed inequality in society. Not capitalism directly as we are often lead to believe.
EDITOR: “Look how the Dem-controlled Senate passed this anti-science, harmful, deadly legislation with a simple 51-vote majority. Clearly Democrat Sen. Majority leader Chuck Schumer, Dirty Coal Joe Manchin and Dem. Sen. John Tester are stinking piles of garbage.
Schumer allowed a simple majority 51-vote on deadly, anti-science legislation, but won’t allow a 51-vote majority on legislation that matters the most to Americans, including essential election reform legislation to save our democracy from a crazed, criminal attempt by the GOP to START THE STEAL IN 2022 AND 2024.”
NBC NEWS: The Senate passed a resolution Wednesday to repeal President Joe Biden's vaccination-or-testing mandate for private-sector employers in a bipartisan rebuke of a key component of the White House's Covid-19 strategy.
The measure, which needed only a simple majority to advance, passed in a 52-48 vote.
It was supported by every Republican and two moderate Democrats: Jon Tester of Montana and Joe Manchin of West Virginia.
“I'm not crazy about mandates,” Tester said before the vote. He said later that the federal requirements were “burdensome regulations.”
Sen. Mike Braun, R-Ind., who introduced the resolution, argued that Biden had no authority to impose the requirements. Braun celebrated the vote Wednesday evening.
"This bipartisan vote is a crystal clear message to the @WhiteHouse: Back off, and stop this crazy federal overreach immediately," he tweeted.
Premise 1. Crypto is here to stay. Like abortion, or drug addiction, prostitution, or alcohol use, you can call it evil and make it illegal, but you can't stop it from happening, so you have to look at how things play out when it is legal versus illegal and pick the net-better scenario.
Premise 2. Modern currencies are fake in that they represent the market value of a human enterprise (a government) rather than goats, chicken, gold, labor, etc. Crypto is based on less reliable human enterprises, but is not inherently of a different or more fake nature than regular currencies. Mr. Reich and others who actually understand economics should correct this premise as needed. The only difference (and it's a big one) is who is backing the currency.
Premise 3. WIth the world economy being conducted increasingly online, money will inevitably become entirely digital anyway, so who are we kidding? We have to get on top of this, by the name crypto currency or just currency. What do we think credit cards have always been? As a former VP of Engineering for a company that intermediated a lot of banking transactions, I can tell you that it's almost entirely done on computers, with relatively little movement of physical dollars.
Conclusion 1. Crypto can't be banished, so it must be controlled. It's not that different than regular currency, except that it is validated in a distributed free-market manner instead of by central governmental agencies. That is, it *is* capitalism, so capitalism hawks (of which there are presumably none on this forum) ought to shut up and sit down (which is what I want them to do in general), and sane, decent people need to regulate it like everything else that is subject to playing a large role in the abuse of capitalism at the expense of people. (As I say here frequently, capitalism, by its very nature, must be regulated if it is to serve rather than destroy people.)
Crypto is rife with financial danger, is widely used in support of illicit activities, and has a significant negative impact on the planet by way of exorbitant energy consumption. But, the first two of these concerns are addressed if crypto is incorporated into the legitimate banking system (which is not immune to these problems but is at least regulated), and the latter by the selection of the right technology. This is not theoretical. Crypto.com / CRO illustrates this approach with an existence proof that it is possible today -- it is being done today.
Conclusion 2. We are in for a bumpy ride. Fortunes will be made and lost. Banishment will only prolong that agony by extending the period of time during which crypto is non-legal or illegal, hyper-risky, and unregulated. We have to get on it with vigorous enthusiasm rather than run away from it. How it differs from regular currency is who says how much a particular coin is worth. That's just how the stock market works. It's no more radical than comparing the stock market to a currency. We need the equivalent of the SEC.
I’m seeing in the comments that there’s a lot of confusion about what cryptocurrency is and how it works. Let me say first that I’m very impressed. It is a rare and wonderful thing to hear someone say “I don’t know,” and even rarer online, but it makes for much better conversation.
Now a few more thoughts on the subject at hand:
Part of the reason that cryptocurrency is so mind-bending is the question of value. In other words, if the currency isn’t backed by a government (for example, US dollars) or tangible resources, how does it have real value or purchasing power? The unsatisfactory answer is that cryptocurrencies have value because people believe they do. (Much similar to the stock market.)
When people speculatively buy cryptocurrency, they are betting on the fact that people will continue to believe that cryptocurrencies have value. This is dangerous because, as the perceived value swings up and down, people who raced to buy when the price was high are left with tough cookies when the price drops.
For those who understood that buying cryptocurrency was a gamble, that’s a loss and part of the game. But in order for cryptocurrency to rise in value, it requires rising demand, in other words, more people buying crypto regardless of how well they understand it. The hype, the jargon (which bolsters the lie that that only smart and financially-savvy people “get” crypto), this all drives people who often know very little or nothing about cryptocurrency to buy it, thinking of it as an investment rather than a gamble. Often, these are people who can least afford to lose.
As I noted in my post this morning, we’re seeing a race between speculators who stand to gain billions by keeping the crypto arena unregulated and those who stand to lose. Without regulation, cryptocurrencies will leave people vulnerable to predatory practices. The government needs to step in before DC is completely captured by crypto-interests.
Another item in the long list of corruption that permeates this country. I wonder whether the crypto-lobbyists are secretly advising members of Congress and judges about crypto-deals that will enhance their personal wealth. The de facto religion of this country is money worship..
Interesting read. How do you plan on regulating the use of Bitcoin for ransomware? I work in cybersecurity and see ransomware attacks happen all of the time . If Bitcoin is "regulated", the bad guys will just use a different "unregulated" cryptocurrency. There are hundreds of cryptocurrencies today, I do not see how all these can be regulated. Maybe through the use of a cryptocurrency exchange but there will also always be shady oversees exchanges not based in the U.S. I do think that I big part of why cybercrime is so common is a.) you do not need to know much about computers to carry out a ransomware attack today and b.) poverty. I noticed that many of the people who are involved in cybercrime are from really poor countries. I think it is desperate circumstances that drive people to desperate means. As an example, Russia educated a large number of people in Engineering and Computer Science in the Cold War era. After the collapse of the Soviet Union these people were left without jobs but a technical skillset. This lead to many of them turning to cybercrime for an income. I can almost guarantee that if less people were living in poverty we would see less cybercrime. There are nation-state attackers that will always be there but I think poverty is a big part of it.
Yikes! as if there isn't enough corruption!? I can't wrap my head around the concept of crypto 'currency'. But things were bad enough without it. I hope people who understand this can keep up or even get ahead.
Our technology is outpacing our regulation of it. This is way beyond my field of expertise, but I am very wary of Cashpay and Bitcoin, etc. I foresee that this will be a problem in our economy if we don’t get a tight reign on it quickly. Those who are “in the know” will benefit and leave the rest of us behind. Just one more problem to add to our growing list of complex issues we must confront.
It reminds me of credit derivatives: ) --One of the most poorly kept secrets in Wall Street's empire of fraud was that credit default swaps were never anything but pretend-insurance.
The credit default swap market was a $60 trillion-plus paper Ponzi-scheme. The Wall Street syndicate claiming to "back" this insurance have nothing more than a few billions of dollars of liquidity apiece.
Given the magnitude of this fraud and the audacity of the perpetrators, this alone is reason enough to abolish the Wall Street fraud-factories, abolish the credit default swaps market, and indeed to abolish the entire derivatives market -- so that the banksters cannot perpetrate a similar crime again in the future.
Credit default swaps were banned in the U.S. for many decades, based upon anti-gambling statutes. However the CDS fraud itself only scratches the surface on the monstrous evil behind this scheme. As I have written about frequently in the past, the CDS fraud is a tool which the banksters have used to perpetrate an even greater crime: the sabotage and destruction of most of Europe's debt markets.
Here is how this particular Wall Street scam operates. First of all, the banksters pile on massive shorting with respect to the credit default swaps of a particular European debt-market. This drives the prices of credit default swaps sky-high.
Meanwhile, the banksters' accomplices in the mainstream media then perform their best impersonation of Chicken Little: "the sky is falling on Greece's economy." At this point the third partner of this illegitimate tag-team chimes in: the ratings agencies. Based on nothing more than changes in credit default swap prices and media rhetoric, the ratings agencies downgrade the debt of these Euro markets -- immediately driving interest rates higher.
This significantly raises the interest payments on these debtor economies, instantly making those economies less solvent. This is then followed by another shorting operation in the credit default swap market, more media rhetoric, and more bogus "downgrades.". And thus the perfect vicious-circle of crime is established.
Jamie Dimon (CEO of JP Morgan Chase) got it exactly right when he said recently that the true value of a bitcoin is precisely zero.
And how far will the crypto explosion take political corruption?
The energy use should be enough to shut it down.
Clearly what America needs is a new financial market wealthy investors can further enrich themselves without paying taxes. Robert, you're 110% CORRECT. The crypto market sucks ass.
I recall how Mega-fool Elon Musk used his Twitter acc't to destroy small bitcoin investors for his own personal kicks.
Wealthy people are always trying to figure out how to avoid paying taxes, despite the fact their wealth was created on public roads, public infrastructure and the backs of the working class. Disgusting how the wealthy try to create "something for nothing" while complaining about the middle class and poor receiving "something for nothing."
TIME: Two Things Crypto Investors Should Know About the Infrastructure Bill President Biden Signed
President Joe Biden signed a $1.2 trillion bipartisan infrastructure bill on Nov. 15 — and it includes some new legislation crypto investors should know about.
The new law will require brokers — aka cryptocurrency exchanges — to issue a 1099-B.
In other words, crypto exchanges will now be required to notify the IRS directly of crypto transactions. “The bill will signify the end of hiding many gains for many crypto investors,” says Grant Maddox, an independent CFP based in South Carolina.
This will in turn create tax reporting challenges for many crypto investors, Maddox says.
For investors who use their own crypto wallet, the information reported to the IRS on the 1099 form will be prone to inaccuracy since the exchanges reporting on trading activity will have a limited view into what these investors paid for crypto in the first place.
When cryptos first came out I saw the problems that would come from this. I looked at it through the eyes of an Internal Revenue Agent, who worked cases dealing with money laundering. We live in a point in time where money and power is god to many in this world.
In an "Office Hours" several days ago, I asked Mr Reich to comment on "Bitcoin" and the like. His short response at the time was that it's all a Ponzi hustle. He seems to have been planning a more in-depth response that I only anticipated within the context of that discussion. >This< is the response I was seeking.
As to the question:
"All of which raises the question: As the crypto congressional complex continues to grow, how much longer will lawmakers and regulators be able to rein crypto in?
What do you think?"
I don't think it could possibly happen in the current political climate through legislation. I think the only way it could possibly happen >in< this climate is for the DOD to focus on crypto-currencies as a national security threat, and dedicate a unit of their best assault hackers to insure they're aware of all actors in every crypto transaction they can access, and share any suspicious transactions with the appropriate domestic law enforcement agencies along with the IRS, as well as the CIA to investigate and keep abreast of any possible foreign hostile threats. Keep in mind I say that with fear and trepidation. I'm one of the original "who's gon'na protect us from who's gon'na protect us" types.
Then why - you may wonder - would I take such a position. Quite simply, I think crypto-currency is a far bigger problem than common wisdom may suggest, fraught with unintended consequences that few of us - if any - are equipped to imagine. Also, given that government >creates< the market in the first place, why would we permit antigovernmental, private sector forces to devise a market structure that serves their convenience? Why would we let the foxes rule the henhouse? I strongly urge those of us here who haven't already jumped on the crypto bandwagon, and who are either still mystified by or for whom "the jury is still out" on crypto, to think very carefully about this "new and revolutionary" way of doing business. I'd view it the same way anti-vaxxers view a proven defense against the covid. Those with a relatively reasonable and understandable view is that the covid vaccines haven't been around long enough to understand all the consequences of using it. I feel >just that way< about crypto. Not all innovation is an improvement. Not all change is for the best. The private sector is inherently, by definition, self-serving.
Hi Robert.
I am a (Norwegian) long-time fan, and signed up today mostly to add this comment. (and to support you)
Although I agree on the main intention of this post (that crypto needs regulation), it is cluttered with common misunderstandings I want to address. Because all in all, Bitcoin aids in what you believe in - equality for all. Which I will explain in this comment. It is crucial that well-meaning people with a massive reach like yourself, truly understand the benefits and mechanics of the financial system of the future.
"I should add that simply in order to exist, cryptocurrencies use astonishing amounts of electricity. (The process of creating Bitcoin to spend or trade consumes around 91 terawatt-hours of electricity annually, more than is used by Finland, a nation of about 5.5 million.)"
This is false. Cryptocurrencies that are built using Proof of Work do, but this is uncommon for new cryptocurrencies. Bitcoin is the legacy coin using this method, and the reason for doing so is to protect the network, and incentivize innovation on renewable energy. (Bitcoin power consumption is roughly half of gold mining, and half of powering the traditional banking system). It is important to differentiate between Bitcoin (BTC), and "cryptocurrencies"(anything else).
"Crypto campaign money is now flowing freely to members of Congress (some of it, presumably, in cryptocurrencies – but, who knows?) Congress’s “Blockchain Caucus” now counts 35 lawmakers as members."
Everything is permanently visible on the blockchain. And in the years to come, we will have the technology to easily see the entire origin of funds, as well as AI will be able to trace the flow of money. Transactions that might be impossible to trace now, might be easy to trace in just a few years. So anyone engaging in criminal activity using the blockchain, are likely to get caught in the near future.
Completely anonymous coins like Monero might need to get banned, as the potential to be used in criminal activity trumps most other use cases in my opinion. But Bitcoin transactions are quite transparent.
"Part of the reason that cryptocurrency is so mind-bending is the question of value. In other words, if the currency isn’t backed by a government (for example, US dollars) or tangible resources, how does it have real value or purchasing power? The unsatisfactory answer is that cryptocurrencies have value because people believe they do. (Much similar to the stock market.)"
This is the most important one. The question of value. Similar to how the stock market works, the price of cryptocurrencies goes up based on demand, and how many people believe in it. You compare it to the US dollar, claiming it is "backed by the government", and that is wha gives it value. But does it really? Holding US dollars is a guaranteed way of losing purchasing power.
Ever since Nixon took the US dollar of the gold standard, the differences in society started increasing at an alarming rate. The gap between salaries and productivity. Between rich and poor. And the reason is inflation.
The middle class and above, all have means of protecting themselves against inflation. And inflation is an invisible tax that is mostly paid by the poor.
People who can borrow money, have been able to borrow money with lower interest rates than the average yearly gains in the stock market. Meaning you can borrow $1m at 1.5% interest, and invest in the stock market for an average of 5-10% return. This means you should borrow as much as you possibly can, and invest it in the stock market to increase your wealth.
People living paycheck to paycheck are the ones who end up taking the bill for the wealthy. The purchasing power of their cash is deteriorating every day.
The prices of real estate are ALWAYS going up, regardless of an increase in demand of said property. Why is that? Money printing. Assets with actual value go up in price when money is printed. The value might still be the same, but the price is higher.
Where am I going with all of this?
Bitcoin is a means of fighting all of this. It represents an asset class available to everyone, without requirements. Where the rich might put their money in hedge funds to be less impacted by inflation, getting access to a hedge fund requires a lot of money. The middle class might have savings they invest in the stock market. The poor has none of these options. Except Bitcoin.
As a store of value, like gold, Bitcoin has been the best performing asset since its inception. It has consistently beat gold, stocks and hedge funds, and it requires nothing more than a free wallet to get started. And you can get started with just a few dollars. Anyone can save a few dollars worth of bitcoin every month and start building up their value. The unbanked can use Bitcoin. The poor can use Bitcoin. And the rich are already using Bitcoin.
In terms of energy consumption, Bitcoin mining can be done anywhere in the world. All you need is internet and electricity. Power plants can mine Bitcoin during the night for their excess power, and sell it the next day to offset costs for consumers.
We can set up solar power plants in the middle of the Sahara desert and mine green Bitcoin. Or on a volcano. Or a waterfall in the middle of nowhere. We can utilize green power where there are no people living, which traditionally has been a requirement for usefulness due to the transportation costs of power.
However, right now the crypto space is packed with frauds and scams. Memecoins that are ponzi schemes, worthless art NFTs being sold for millions, presumably for money laundering. And like you have accurately stated, the people who dont have money to lose are often the ones who do. It is the wild west in there right now, and it is hurting all of crypto.
There is no doubt we will be using some cryptocurrencies in the future. We will also be using NFT´s. But not like it currently stands, ridden with scams, manipulation, ponzis and money laundering.
Conclusion:
I wholeheartedly agree the crypto space are in dire need of regulation. But dont get them all mixed up. Bitcoin represents a unique opportunity to increase equality on a global scale. It might not be the payment method of the future. But it is a store of value available to anyone, that has outperformed hedge funds, gold, and the stock market ever since its inception.
It is also a means of storing and transporting energy in a sense, and incentivizes innovation for green energy.
Secondary conclusion:
It was Nixon taking USD off the gold standard that skyrocketed inequality in society. Not capitalism directly as we are often lead to believe.
Thank you for reading :)
I agree! The internet has become a gold rush! No regulation no taxation and all just ones and zeros. They get the ones and we get the zeros!
Robert, please post and discuss this: U.S. Senate passes resolution to repeal Biden vaccine mandate, with help of two Democrats (Manchin & Tester)
https://www.nbcnews.com/politics/congress/senate-passes-resolution-defund-repeal-biden-vaccine-mandate-n1285636
EDITOR: “Look how the Dem-controlled Senate passed this anti-science, harmful, deadly legislation with a simple 51-vote majority. Clearly Democrat Sen. Majority leader Chuck Schumer, Dirty Coal Joe Manchin and Dem. Sen. John Tester are stinking piles of garbage.
Schumer allowed a simple majority 51-vote on deadly, anti-science legislation, but won’t allow a 51-vote majority on legislation that matters the most to Americans, including essential election reform legislation to save our democracy from a crazed, criminal attempt by the GOP to START THE STEAL IN 2022 AND 2024.”
NBC NEWS: The Senate passed a resolution Wednesday to repeal President Joe Biden's vaccination-or-testing mandate for private-sector employers in a bipartisan rebuke of a key component of the White House's Covid-19 strategy.
The measure, which needed only a simple majority to advance, passed in a 52-48 vote.
It was supported by every Republican and two moderate Democrats: Jon Tester of Montana and Joe Manchin of West Virginia.
“I'm not crazy about mandates,” Tester said before the vote. He said later that the federal requirements were “burdensome regulations.”
Sen. Mike Braun, R-Ind., who introduced the resolution, argued that Biden had no authority to impose the requirements. Braun celebrated the vote Wednesday evening.
"This bipartisan vote is a crystal clear message to the @WhiteHouse: Back off, and stop this crazy federal overreach immediately," he tweeted.
Premise 1. Crypto is here to stay. Like abortion, or drug addiction, prostitution, or alcohol use, you can call it evil and make it illegal, but you can't stop it from happening, so you have to look at how things play out when it is legal versus illegal and pick the net-better scenario.
Premise 2. Modern currencies are fake in that they represent the market value of a human enterprise (a government) rather than goats, chicken, gold, labor, etc. Crypto is based on less reliable human enterprises, but is not inherently of a different or more fake nature than regular currencies. Mr. Reich and others who actually understand economics should correct this premise as needed. The only difference (and it's a big one) is who is backing the currency.
Premise 3. WIth the world economy being conducted increasingly online, money will inevitably become entirely digital anyway, so who are we kidding? We have to get on top of this, by the name crypto currency or just currency. What do we think credit cards have always been? As a former VP of Engineering for a company that intermediated a lot of banking transactions, I can tell you that it's almost entirely done on computers, with relatively little movement of physical dollars.
Conclusion 1. Crypto can't be banished, so it must be controlled. It's not that different than regular currency, except that it is validated in a distributed free-market manner instead of by central governmental agencies. That is, it *is* capitalism, so capitalism hawks (of which there are presumably none on this forum) ought to shut up and sit down (which is what I want them to do in general), and sane, decent people need to regulate it like everything else that is subject to playing a large role in the abuse of capitalism at the expense of people. (As I say here frequently, capitalism, by its very nature, must be regulated if it is to serve rather than destroy people.)
Crypto is rife with financial danger, is widely used in support of illicit activities, and has a significant negative impact on the planet by way of exorbitant energy consumption. But, the first two of these concerns are addressed if crypto is incorporated into the legitimate banking system (which is not immune to these problems but is at least regulated), and the latter by the selection of the right technology. This is not theoretical. Crypto.com / CRO illustrates this approach with an existence proof that it is possible today -- it is being done today.
Conclusion 2. We are in for a bumpy ride. Fortunes will be made and lost. Banishment will only prolong that agony by extending the period of time during which crypto is non-legal or illegal, hyper-risky, and unregulated. We have to get on it with vigorous enthusiasm rather than run away from it. How it differs from regular currency is who says how much a particular coin is worth. That's just how the stock market works. It's no more radical than comparing the stock market to a currency. We need the equivalent of the SEC.