There will never be a sovereign crypto currency

[12DrinkMore]

This just me rambling on here, so don't get too upset.....

 

There is a general misconception that governments actually issue all the sovereign currency in existence. In fact only the paper and metal in your pockets is issued by the governments, accounting for under 3% of what we call "currency".

 

The THB in your bank account balance was not issued by the Thai government. It is the result of the Bangkok Bank, or SCB or one of the others making a loan to somebody at sometime in the past.

 

As we move towards a cashless society, there would be no need for the government to issue any cash at all. The 3% would simply end up in the banking system, although the government would, through the Central Bank, have to issue an equvalent amount of reserves to the banks as the physical money was collected and withdrawn from circulation. Each banknote has the implicit promise (or in the case of GBP, explicit) that the government is liable for the face value.

 

With the government no longer involved in the money creation process, would the commercial banks be interested in issuing a crypto currency based on the sovereign currency?

 

The claims of the crypto fans is that the crypto can be stored in a wallet outside of the banking system, with no more liability of the issuer. There is a huge accounting problem in doing this. At the moment if a bank issues physical cash it reduces its liabilities (your account) with a corresponding reduction in its assets (cash in the vault). It would be impossible to issue crypto currency to be taken out of the system without somehow reducing the corresponding assets (mortgages and other loans). This is the main mechanism by which the banks are restricted from issuing zillions of cash for nothing, destroying the economy in the process. There always has to be corresponding bookkeeping entries on both sides of their balance sheets.

 

The banks and regulators will have zero interest in issuing a bank crypto.

 

Please note that I am not writing about the blockchain technology. A lot of people do not seem to understand that crypto is not equal to blockchain. It is quite possible that banks will implement blockchain technology for electronic transfers within the banking system. But this will have to be fast, cheap and transparent to the users.

 

Comments?

 

[Enoon]

 

I'm not upset.

 

When I saw the thread in the list I knew it had to be you.

 

I will not be purchasing any crypto, because the instant I do it will tank.

 

I'm going to do a bit of peer to peer.

 

 

[dutchberliner]

Having a blockchain without an asset token like Bitcoin to secure it is pretty pointless. Without a token you might as well run a Google spreadsheet.

 

Without a token, how are you going to reward miners to secure the chain and process transactions?

 

Furthermore, the value of a blockchain is derived from it being censorship resistant and immutable.

This will be very important once the Orwellian cashless society becomes reality. 

 

Have you considered the totalitarian nightmare we could enter once every financial transaction can be blocked or reversed by the powers that be?

 

Crypto currencies and more precisely Bitcoin are the last line of defence the people have against this nightmarish future.

[12DrinkMore]

24 minutes ago, Enoon said:

I'm going to do a bit of peer to peer.

 

I was looking at that a month or so ago. You have remined me to revisit. I don't know anywhere in Thailand but Singapore has a company doing it. I am sure the Singaporeans would treat a loan with more respect than the Thais, who generally reckon it is a gift.

 

The net yield looks a little better than I can get in stocks. I might try a smallish sum first. At least the loans are backed by something more solid than crapto-hype.

 

[12DrinkMore]

9 minutes ago, dutchberliner said:

This will be very important once the Orwellian cashless society becomes reality. 

 

Have you considered the totalitarian nightmare we could enter once every financial transaction can be blocked or reversed by the powers that be?

 

Crypto currencies and more precisely Bitcoin are the last line of defence the people have against this nightmarish future.

 

Although there is always the threat of abuse by TPTB, I think I am going to remain optimistic that the legal system and votes will keep them in check.......

 

 

[ukrules]

28 minutes ago, dutchberliner said:

Having a blockchain without an asset token like Bitcoin to secure it is pretty pointless. Without a token you might as well run a Google spreadsheet.

 

Without a token, how are you going to reward miners to secure the chain and process transactions?

 

Furthermore, the value of a blockchain is derived from it being censorship resistant and immutable.

This will be very important once the Orwellian cashless society becomes reality. 

 

Have you considered the totalitarian nightmare we could enter once every financial transaction can be blocked or reversed by the powers that be?

 

Crypto currencies and more precisely Bitcoin are the last line of defence the people have against this nightmarish future.

 

It's not pointless, think of it as a read only distributed database which everyone can access and keep a full copy of but only authorised users can write to.

 

This is a 'permissioned blockchain'. I see a major use for something like this, a shared global PKI / ID system with multiple separate entities adding their own records into the system (write access) and everyone else having read access.

 

Being p2p in nature something like this would be very powerful and could be used to publish all sorts of information, for example it could replace torrent sites which contain magnet links....there are many uses for such a technology and it doesn't need dumb tokens as it's permissioned.

 

Also nobody would be able to see what you're looking at inside the blockchain - this is a big benefit if you cosider it could be used for email public key lookups, etc.

 

[dutchberliner]

 

A permissioned blockchain does not solve the trust issue.

 

Why trust humans when you know it is a matter of when and not if they get corrupted? 

 

No need to trust in social consensus when in certain use cases machine consensus is preferable.

 

There is a reason why virtually every permissioned blockchain running in production anchors their data to the Bitcoin blockchain for proof of immutability. They need a public decentralised blockchain to prove that their data can be trusted to be tamper proof.

 

This article explains it pretty well. Bottom line: if you don't need censorship resistance and immutability then most blockchain use cases are lots of hype with little substance.

 

https://www.forbes.com/sites/laurashin/2017/02/07/the-first-government-to-secure-land-titles-on-the-bitcoin-blockchain-expands-project/#c5fe7ca4dcdc

 

[dutchberliner]

40 minutes ago, 12DrinkMore said:

 

Although there is always the threat of abuse by TPTB, I think I am going to remain optimistic that the legal system and votes will keep them in check.......

 

 

Yeah why would you want that if there is an alternative. History has proven that power corrupts and absolute power corrupts absolutely. 

 

Sounds to me that you suffer from HOMO (hate of missing out) and that prevents you from being objective here.

[Calach]

1 hour ago, 12DrinkMore said:

 

Although there is always the threat of abuse by TPTB, I think I am going to remain optimistic that the legal system and votes will keep them in check.......

 

 

This is not optimism, it's wishful thinking. 

 

I don't see why governments would need a blockchain currency btw, except to track every single transaction, but apart from some additional security the benefit for the public would be minimal compared to the current system. I personally don't think we will replace traditional national currencies, that are still the least bad option, by the technological dream of libertarian geeks, but beyond the insane speculation I find it a very interesting option, some sort of insurance policy against governments currency mismanagement, one for central banks to keep in mind before printing tons money. On the long-term at least, right now the frenzy, chaos and thousands currencies is maintaining a high level of confusion and tension over this space (even for those of us who live from crypto), but the dust will settle eventually. Perhaps in 1 year, perhaps in 10, even if crypto collapses ten times by then, the idea is here and won't go away, and we should fully grasp the real value of Bitcoin or whichever coin will prevail during the next financial crisis. Zimbabweans and Venezuelans have already. 

[BuaBS]

1 hour ago, dutchberliner said:

Crypto currencies and more precisely Bitcoin are the last line of defence the people have against this nightmarish future.

No , there will still be gold (and silver).

[Suradit69]

1 hour ago, 12DrinkMore said:

I think I am going to remain optimistic that the legal system and votes will keep them in check.......

That would be refreshing. When do you expect that will start happening? 

[mrfaroukh]

As many knows few countries already band bitcoin etc. South Korea just come with new law that accounts for bitcoin etc should be connected to their bank account so no illegal activity is there and foreigners can not buy any. So why the hell people should buy it if it is not for criminal activity , not paying taxes etc. So I guess the end is near. Those who buy them in good time and sold in good time became millioners and those who started late may ....

[watcharacters]

5 minutes ago, mrfaroukh said:

As many knows few countries already band bitcoin etc. South Korea just come with new law that accounts for bitcoin etc should be connected to their bank account so no illegal activity is there and foreigners can not buy any. So why the hell people should buy it if it is not for criminal activity , not paying taxes etc. So I guess the end is near. Those who buy them in good time and sold in good time became millioners and those who started late may ....

 

 

 

Someone (s) at some point in time could very likely be left holding the bag.

 

 

 

[Brunolem]

Can anyone see the total allegiance of all cryptos to the USD?

Isn't that strange that a system supposed to circumvent the actual official paper currencies, actually revolves around said currencies, with the USD at its center?

 

Why are all these cryptos valued in USD?

Why are so many speculators interested only in making a quick buck, and not a quick ethereum for example, while buying and selling cryptos?

Why are the happy owners of a large number of bitcoins considered as millionaires, or even billionaires, in USD?

 

Where is the independence in that?

 

If you are involved in transactions within, say, Thailand, you are going to buy and sell in Thai baht, without feeling the necessity to convert each transactions into USD, because unless you are an American planning to rapatriate the money, there is no point in doing that.

 

Yet, when it comes to cryptos, it's always about the USD.

 

As long as crypto supporters value their (potential) gains and losses with regards to the USD, these cryptos will remain vassals of the USD, which is exactly what they are not supposed to be.

[DeeMak9]

59 minutes ago, Brunolem said:

Can anyone see the total allegiance of all cryptos to the USD?

Isn't that strange that a system supposed to circumvent the actual official paper currencies, actually revolves around said currencies, with the USD at its center?

 

Why are all these cryptos valued in USD?

Why are so many speculators interested only in making a quick buck, and not a quick ethereum for example, while buying and selling cryptos?

Why are the happy owners of a large number of bitcoins considered as millionaires, or even billionaires, in USD?

 

Where is the independence in that?

 

If you are involved in transactions within, say, Thailand, you are going to buy and sell in Thai baht, without feeling the necessity to convert each transactions into USD, because unless you are an American planning to rapatriate the money, there is no point in doing that.

 

Yet, when it comes to cryptos, it's always about the USD.

 

As long as crypto supporters value their (potential) gains and losses with regards to the USD, these cryptos will remain vassals of the USD, which is exactly what they are not supposed to be.

 

Obviously because houses, bread and water are still priced in fiat. Besides that, almost all cryptos are actually valued in bitcoin. Of course a lot of people calculate back to fiat from there.

[Laza 45]

2 hours ago, BuaBS said:

No , there will still be gold (and silver).

...I read somewhere today that the Australian mint is working on a crypto-currency backed by gold.. 

 

[Laza 45]

http://www.abc.net.au/news/2018-01-24/cryptocurrency-backed-by-gold-being-developed-perth-mint/9352036

[Calach]

2 hours ago, Brunolem said:

Can anyone see the total allegiance of all cryptos to the USD?

Isn't that strange that a system supposed to circumvent the actual official paper currencies, actually revolves around said currencies, with the USD at its center?

 

Why are all these cryptos valued in USD?

Why are so many speculators interested only in making a quick buck, and not a quick ethereum for example, while buying and selling cryptos?

Why are the happy owners of a large number of bitcoins considered as millionaires, or even billionaires, in USD?

 

Where is the independence in that?

 

If you are involved in transactions within, say, Thailand, you are going to buy and sell in Thai baht, without feeling the necessity to convert each transactions into USD, because unless you are an American planning to rapatriate the money, there is no point in doing that.

 

Yet, when it comes to cryptos, it's always about the USD.

 

As long as crypto supporters value their (potential) gains and losses with regards to the USD, these cryptos will remain vassals of the USD, which is exactly what they are not supposed to be.

 

Only crypto maximalists would think like that, apart from hardcore ideologues no one think Bitcoin will totally replace USD, which for the moment we still need to pay the rent and buy lambos. 

[12DrinkMore]

23 minutes ago, Laza 45 said:

http://www.abc.net.au/news/2018-01-24/cryptocurrency-backed-by-gold-being-developed-perth-mint/9352036

 

A publicity stunt to sell more gold.

 

How are they planning to cover the costs of insurance and storage?

 

 

[BuaBS]

2 hours ago, Laza 45 said:

...I read somewhere today that the Australian mint is working on a crypto-currency backed by gold.. 

 

I wouldn't trust them , or maybe for very small amounts.

[ukrules]

8 hours ago, dutchberliner said:

Bottom line: if you don't need censorship resistance and immutability then most blockchain use cases are lots of hype with little substance.

What if you do need these ?

[dutchberliner]

8 hours ago, BuaBS said:

No , there will still be gold (and silver).

Good luck taking gold through customs or buying something with it in general.

 

Gold is very impractical compared to Bitcoin 

[Laza 45]

9 hours ago, 12DrinkMore said:

 

A publicity stunt to sell more gold.

 

How are they planning to cover the costs of insurance and storage?

 

 

....It is the Australian mint.. I guess they already have that in place..

[BuaBS]

6 hours ago, dutchberliner said:

Good luck taking gold through customs or buying something with it in general.

 

Gold is very impractical compared to Bitcoin 

True , but it is a far better store of value . I would not want my life savings in crypto currencies for extended periods.

[lkn]

8 hours ago, ukrules said:

17 hours ago, dutchberliner said:

Bottom line: if you don't need censorship resistance and immutability then most blockchain use cases are lots of hype with little substance.

What if you do need these ?

Even if you need these, the blockchain is no guarantee.

 

The blockchain relies on having a lot of people mirror the entire chain, if there are no-one mirroring the chain, the censorship property disappears. And people could just as well mirror wikipedia or some other source of information, the only difference is that currently people are incentivised to participate in the bitcoin blockchain, but if I were to start a new blockchain, few would start to mirror this for me without being rewarded.

 

For immutability, you can make a similar argument to the above. It’s only immutable because a lot of people have a copy of it.

 

If a government or similar wants to be transparent, just publish information to a government run website. Journalists, government watchdogs, and other stakeholders will mirror the website, so should the government ever make changes to already published documents, people will know.

 

Also consider the downside of true immutability; eventually someone will post information that should not have been posted, today this is already a problem even when people have the ability to undo, but if they are too slow, it’ll be all over the internet…

 

And also try to think of actual use-cases of immutability. The examples I have seen are about putting government databases on the blockchain; however, it would be the government posting changes to the blockchain, so if you suspect that the government are making incorrect changes to their databases, nothing prevents them from posting incorrect changes to the blockchain.

 

Best-case the blockchain just provides a standard format for performing an audit, but the government could effectively just put up their data as CSV files on some website, and people can audit these as well.

[Brunolem]

1 hour ago, BuaBS said:

True , but it is a far better store of value . I would not want my life savings in crypto currencies for extended periods.

Especially if you consider this...

 

https://www.zerohedge.com/news/2018-01-23/more-10-37bn-ico-profits-has-been-stolen-hackers

 

 

 

 

[chingching]

Your basic premise is wrong.  Money is created by the process of loans, BUT local banks like SCB or Bangkok Bank, or Citibank can only loan out an amount dictated by the central bank.  For example if SCB has 100M thb from deposits, the Central Bank will allow them to loan a fraction of it ( fractional reserve ) So if they are allowed to loan 50% they can loan 50M,  and that has created 50M thb that did not exist before.  If the local banks did not have to take direction from the govt. central bank, then why not go into SCB and ask for a 1M dollar loan in USD.   

[ukrules]

5 hours ago, lkn said:

Even if you need these, the blockchain is no guarantee.

 

The blockchain relies on having a lot of people mirror the entire chain, if there are no-one mirroring the chain, the censorship property disappears. And people could just as well mirror wikipedia or some other source of information, the only difference is that currently people are incentivised to participate in the bitcoin blockchain, but if I were to start a new blockchain, few would start to mirror this for me without being rewarded.

 

For immutability, you can make a similar argument to the above. It’s only immutable because a lot of people have a copy of it.

 

If a government or similar wants to be transparent, just publish information to a government run website. Journalists, government watchdogs, and other stakeholders will mirror the website, so should the government ever make changes to already published documents, people will know.

 

Also consider the downside of true immutability; eventually someone will post information that should not have been posted, today this is already a problem even when people have the ability to undo, but if they are too slow, it’ll be all over the internet…

 

And also try to think of actual use-cases of immutability. The examples I have seen are about putting government databases on the blockchain; however, it would be the government posting changes to the blockchain, so if you suspect that the government are making incorrect changes to their databases, nothing prevents them from posting incorrect changes to the blockchain.

 

Best-case the blockchain just provides a standard format for performing an audit, but the government could effectively just put up their data as CSV files on some website, and people can audit these as well.

 

You're right, it could be published as a CSV file, the actual storage format would be largely irrelevant so long as the structure is correct.

 

The 'chain' element is what prevents changes from happening to historical data.

 

I liken it to how Timestamp authorities work, for example this one chains a new entry to previous entries using hashes : http://truetimestamp.org they call it a 'Sequential Fingerprint' which links each new entry to the previous entry (kind of like a block header linking back to the hash of the previous block header in Bitcoin) so it's an unbroken chain right back to the initial block / record entry, this way any changes can be detected.

 

Something like the above TSA which is more open and shared as a 'p2p database' would be more than sufficient and would not need miners or any kind of coin. If many people wanted to access a full TSA type system then they would need to operate a node, that would be incentive enough as they gain access to the entire dataset and would presumably also be granted a key by the root operator to make writes into the system.

 

 

[ukrules]

14 minutes ago, chingching said:

Your basic premise is wrong.  Money is created by the process of loans, BUT local banks like SCB or Bangkok Bank, or Citibank can only loan out an amount dictated by the central bank.  For example if SCB has 100M thb from deposits, the Central Bank will allow them to loan a fraction of it ( fractional reserve ) So if they are allowed to loan 50% they can loan 50M,  and that has created 50M thb that did not exist before.  If the local banks did not have to take direction from the govt. central bank, then why not go into SCB and ask for a 1M dollar loan in USD.   

 

The reserve requirement in many countries is trending downwards over the decades or is already close to or equal to zero percent mandatory reserves.

 

For example in the UK and a few other countries I believe they abandoned the compulsory and enforceable (by the central bank) reserve requirement completely - it's essentially a free for all

[Brunolem]

12 minutes ago, ukrules said:

 

The reserve requirement in many countries is trending downwards over the decades or is already close to or equal to zero percent mandatory reserves.

 

For example in the UK and a few other countries I believe they abandoned the compulsory and enforceable (by the central bank) reserve requirement completely - it's essentially a free for all

On top of that, central banks themselves are creating money hands over fists, in order to hold the crumbling system together, especially in Japan and Europe...just look at the SNB (Swiss)...