Will DeFi Kill Banks?

[Neeranam]

4 minutes ago, Heng said:

What a day.   

A good feeling  when the exchanges start to overload. ???? 

[The Hammer2021]

On 10/2/2021 at 2:41 AM, HenryfromMalaysia said:

Maybe he is promoting UniSwap or the Chinese Government? ????

 

Speaking of Chinese, had this spam third time on the Asian crypto chat today

 

上周中国对所有现有加密货币的禁令是真实且正式的。中国打算在 2021 年 10 月 1 日国庆日推出自己的加密货币 ChinaCoinCC

Google translate is 

China's ban on all existing cryptocurrencies last week was real and official. China intends to launch its own cryptocurrency ChinaCoinCC on National Day, October 1, 2021

Got to love China and the Chinese. 

 

Chinese reds! Steeped in the blood of political prisoners and there body parts. Blood-red

[Neeranam]

[Neeranam]

 

[mjnaus]

1 hour ago, Neeranam said:

 

That's one down, many to follow: https://decrypt.co/83914/sec-vaneck-launch-bitcoin-futures-etf. Bitcoin ETF's, albeit the <deleted>ty futures based kind, are just the beginning. Only a matter of time before the first ETH based ETF starts trading. 

[lkn]

On 10/8/2021 at 5:48 PM, The Cipher said:

You can also read about Axie Infinity, an online game built on Ethereum with millions of players

Just finished listening to an interview with their co-founder Aleksander  Leonard Larsen (on Bloomberg’s Odd Lots podcast), and their game is not running on the Ethereum chain.

 

They introduced the Ronin side-chain, which they run and control 100% and their game logic is off-chain.

 

The reason: Cheaper, faster, and it allows them to control things like kick users who create multiple accounts.

 

Now, the co-founder *would* like to run this all decentralized, but he said that it is 5-10 years away (really, he has no idea, and I doubt it will ever be).

 

Furthermore, the host asked him: If one of the popular services running on the blockchain grows popular, wouldn’t this service also just switch to central/private chain (to improve performance, avoid high gas fees, etc.)? And without hesitation, Aleksander replied: Absolutely!

 

Blockchain is a great buzzword to attract money, but I repeat, it is a slow and expensive solution, which is only useful if your problem is regulation.

[The Cipher]

3 hours ago, lkn said:

Just finished listening to an interview with their co-founder Aleksander  Leonard Larsen (on Bloomberg’s Odd Lots podcast), and their game is not running on the Ethereum chain.

 

They introduced the Ronin side-chain, which they run and control 100% and their game logic is off-chain.

 

The reason: Cheaper, faster, and it allows them to control things like kick users who create multiple accounts.

 

Now, the co-founder *would* like to run this all decentralized, but he said that it is 5-10 years away (really, he has no idea, and I doubt it will ever be).

 

Furthermore, the host asked him: If one of the popular services running on the blockchain grows popular, wouldn’t this service also just switch to central/private chain (to improve performance, avoid high gas fees, etc.)? And without hesitation, Aleksander replied: Absolutely!

 

Blockchain is a great buzzword to attract money, but I repeat, it is a slow and expensive solution, which is only useful if your problem is regulation.

Unfortunately I don't have time to write a detailed response today. However, would argue that none of this dampens my bullishness on transition to web 3.0.

 

Eth sidechains aren't not Ethereum and development of 3.0 applications is ongoing and growing. Never was going to be a lightswitch, I'd more look at it like - is the snowball growing as it rolls downhill?

 

Unrelated to the above, I'm not sure how I feel about regulatory policy. Some days it's extremely frustrating for me, because it's obviously a speed bump to talent in essentially an attempt to slow things down for the less-capable (see: 19, Covid) to the net detriment of society. But other times it does seem that additional regulation would have broad benefits, for example regulations to ensure that the playing field remains somewhat more level (see: megacorp antitrust) in a way that would be to the net benefit of society.

[lkn]

On 10/25/2021 at 8:30 PM, The Cipher said:

However, would argue that none of this dampens my bullishness on transition to web 3.0

What is Web3 and what new services will it allow?

 

On 10/25/2021 at 8:30 PM, The Cipher said:

Eth sidechains aren't not Ethereum

Call it what you want, but do we agree that this is not censorship resistent (e.g. they ban multiple accounts), it is not trustless or even transparent (game logic is off-chain), nor is it decentralized (nodes run by Sky Mavis)?

 

Two other interesting things said by their co-founder in this interview:

 

1. Only 20% of players play the game because they enjoy it, the rest are there to make money.

2. New money in the game comes from new players (startup cost around $1,000), and eventually they will run out of new players (new money), but they *hope* at that time, the game is fun enough to keep people around.

 

So Axie Infinity is just another pyramid scheme / MLM.

 

Is that Web3? ????

Edited October 27, 2021 by lkn
Add link to analysis of sustainability of the game

[The Cipher]

5 hours ago, lkn said:

So Axie Infinity is just another pyramid scheme

I read the linked article, and it sure sounds like it. Like the author, I don't think a more sustainable transition is likely either. I'll take the L on Axie here, I hadn't looked into it in depth and was probably wrong to bring it up.

 

On 10/25/2021 at 11:30 AM, The Cipher said:

Never was going to be a lightswitch, I'd more look at it like - is the snowball growing as it rolls downhill?

However this is, and will continue to be, what I continue to primarily keep an eye on. Broad macro news has tended to be positive over time. Mastercard is moving to broad crypto integration, for instance.

 

It continues to make no sense to me to be at zero crypto exposure. The view I'm taking here is my own personal view as an investor. Let's assume three scenarios:

• Downside: In this extreme downside case, let's assume all crypto goes to zero at some uncertain time in the future. Do I believe that I will still benefit from exposure to this asset class in fiat terms before it heads down to nil value? Well, yes. I'm confident in my ability to realize some amount of profit before the eventual slide to zero. The only way it doesn't make sense to invest here, is if you believe that <your crypto's> all-time high watermark is behind us, and that your current buy-in price won't be meaningfully exceeded ever again.
• Boring: Nothing happens. Volatility becomes zero and market caps don't move from here to forever. In some ways this is worse than the eventual path to zero because you're guaranteed to make no money. Opportunity cost becomes a factor here, but zero exposure still makes no sense, since the future is unknowable at the time of investment it still makes sense to put some chips in.
• Upside: Successful crypto integration into broad finance and the real economy. Crypto's promise as a disruptor fulfilled. Don't need to explain this one. Rewards for early adoption likely to be significant and meaningfully in excess of TradFi returns over the same period. Questions I ask myself are, does it seem that we are moving in this direction in general and over time?

However, the above framework only makes sense for people who are longer-horizon, relatively unconcerned with day to day volatility, and are plugged in enough to keep on top of the rapidly changing environment. Some familiarity with tech helps also. Long way of saying that basically it's not a great choice for many retirees. I've gotta keep repeating that these posts aren't enticements to invest and that I don't think crypto makes sense for much of this site's audience.

[fdsa]

I don't know if DeFi would kill banks or not, but I know for sure that the "blast from the past" system from 70's called "SWIFT" must perish.

Today I had to make a SWIFT transfer of 100 EUR and paid 45 EUR transaction fee.

Yes, that's 45% fee.

 

Current Bitcoin transaction fee is $10 and Ethereum transaction fee is $15.

And I'm not mentioning the much better yet less known alternatives to BTC and ETH.

 

What, SWIFT is intended for the large sums only? Send 10k USD and the transaction fee won't be that high?

Wait, I've heard that already... about Bitcoin and Ethereum transactions.

[lkn]

On 10/28/2021 at 8:31 PM, fdsa said:

Current Bitcoin transaction fee is $10 and Ethereum transaction fee is $15.

And I'm not mentioning the much better yet less known alternatives to BTC and ETH

Would that alternative be Wise? I can transfer 100 EUR for €1.39 and then it gets deposited directly into my Thai bank account in a few seconds, so no additional fee or hassle with on/off-ramping, and giving me close to the “official” exchange rate.

 

Btw: SWIFT does not facilitate funds transfer: rather, it sends payment orders, which must be settled by correspondent accounts that the institutions have with each other. In Europe, many banks instead use SEPA Instant Credit Transfer, and the G20 countries have established a task force to harmonize global payments, which is probably some years away, as we are talking about harmonizing regulation (like AML/KYC) in more than 200 countries and software systems in more than 11,000 banks. Building an alternative money transmission network seems much easier, and was already done by PayPal more than 20 years ago.

[lkn]

On 10/27/2021 at 6:33 PM, The Cipher said:

However this is, and will continue to be, what I continue to primarily keep an eye on. Broad macro news has tended to be positive over time. Mastercard is moving to broad crypto integration, for instance.

I agree that a lot of respectable businesses appear to have jumped on the crypto train, but it often boils down to PR hype.

 

IBM launched a blockchain team to much fanfare in the crypto community, but anyone with half a brain found it stupid, and latest news: “There is not really going to be a blockchain team any longer,” said a person familiar with the situation.

 

Microsoft launched a hosted blockchain service six years ago, again touted as proof of the technology having merit, and latest news: Microsoft is shutting down its Azure Blockchain Service on September 10, 2021.

 

Any investor will ask: What problem is being solved and how is value being created? For majority of these “announcements” there is no good answer.

 

I tried to understand the Mastercard/Bakkt partnership, as far as I can tell, Bakkt is a platform that allow for consumers to buy, sell and hold digital assets through custodial wallets and issuance of branded crypto debit and credit cards. I don’t understand the partnership, because people normally have their Mastercard through their bank or other institution, is the partnership perhaps just, that you can (now) get a Mastercard for your Bakkt wallet, where previously it was maybe limited to Visa only (or no card at all)?

 

Brokers (e.g. RobinHood), digital wallets (e.g. PayPal), and even banks (e.g. Revolut), have already enabled their customers to buy, sell, and hold crypto currencies via a custodial wallet. This creates value for the provider through commission fees, but I don’t see this solving problems for the consumer, nor enabling new services. I fear that a lot of people will just end up losing a lot of money, because, as I have repeatedly argued, no value is being created by all of us putting money into what is effectively a penny stock, it is just a pump and dump scheme, but unfortunately people can’t understand the simple math behind a zero-sum game, take this post to r/SHIBArmy, that group has > 300,000 members, and > 6,000 of them upvoted this post, which basically says, go buy this coin that is not used for anything, and the price will go up, and we will all be rich. And people are actually believing in this, it is a scam, but the perpetrators do not realize it themselves.

 

Two days ago, presale for another dog-themed coin started, and people bought coins for $60 million before all the money disappeared, and no coin was created.

 

I know I am getting repetitive, but the value of crypto really just seems to be scamming other people. Yesterday there was a CryptoPunk NFT selling for $500 million, showing us again how these NFTs go up in value, but no, that was just a guy doing wash trades to increase the perceived value of his NFT before trying to resell it to a greater fool.

 

I heard someone say that the problem with operating in a trustless environment is, that it attracts all the people you can’t trust. In another news from this week, $130 million were stolen from “DeFi” lending service. I mean, this stuff just happens again and again, and OP is asking if DeFi is the future of banking?

 

On 10/27/2021 at 6:33 PM, The Cipher said:

It continues to make no sense to me to be at zero crypto exposure

Your view is shared with Jim Cramer of Mad Money, though his reason is simple: I’m holding onto my Ethereum because I believe there could be millions of greater fools out there. I think that’s a decent bet.

 

If you follow some of the crypto groups on reddit, you will however come across a lot of sad posts, one guy had cashed in his 401k and put it all in crypto, another guy had liquidated his college fund, put in Doge, and now had no money for college, etc.

 

Honestly, I think I am starting to believe that crypto really is cancer for our society, it wastes a tremendous amount of resources, and *a lot* of people will lose their life savings on this, in fact, they have already lost most of their money, because the liquidity is simply not there for people to realize their gains. Partly because when they bought, someone else cashed out (and took their money), partly because of the tremendous amount of money that goes to miners.

[ThailandRyan]

28 minutes ago, lkn said:

I agree that a lot of respectable businesses appear to have jumped on the crypto train, but it often boils down to PR hype.

 

IBM launched a blockchain team to much fanfare in the crypto community, but anyone with half a brain found it stupid, and latest news: “There is not really going to be a blockchain team any longer,” said a person familiar with the situation.

 

Microsoft launched a hosted blockchain service six years ago, again touted as proof of the technology having merit, and latest news: Microsoft is shutting down its Azure Blockchain Service on September 10, 2021.

 

Any investor will ask: What problem is being solved and how is value being created? For majority of these “announcements” there is no good answer.

 

I tried to understand the Mastercard/Bakkt partnership, as far as I can tell, Bakkt is a platform that allow for consumers to buy, sell and hold digital assets through custodial wallets and issuance of branded crypto debit and credit cards. I don’t understand the partnership, because people normally have their Mastercard through their bank or other institution, is the partnership perhaps just, that you can (now) get a Mastercard for your Bakkt wallet, where previously it was maybe limited to Visa only (or no card at all)?

 

Brokers (e.g. RobinHood), digital wallets (e.g. PayPal), and even banks (e.g. Revolut), have already enabled their customers to buy, sell, and hold crypto currencies via a custodial wallet. This creates value for the provider through commission fees, but I don’t see this solving problems for the consumer, nor enabling new services. I fear that a lot of people will just end up losing a lot of money, because, as I have repeatedly argued, no value is being created by all of us putting money into what is effectively a penny stock, it is just a pump and dump scheme, but unfortunately people can’t understand the simple math behind a zero-sum game, take this post to r/SHIBArmy, that group has > 300,000 members, and > 6,000 of them upvoted this post, which basically says, go buy this coin that is not used for anything, and the price will go up, and we will all be rich. And people are actually believing in this, it is a scam, but the perpetrators do not realize it themselves.

 

Two days ago, presale for another dog-themed coin started, and people bought coins for $60 million before all the money disappeared, and no coin was created.

 

I know I am getting repetitive, but the value of crypto really just seems to be scamming other people. Yesterday there was a CryptoPunk NFT selling for $500 million, showing us again how these NFTs go up in value, but no, that was just a guy doing wash trades to increase the perceived value of his NFT before trying to resell it to a greater fool.

 

I heard someone say that the problem with operating in a trustless environment is, that it attracts all the people you can’t trust. In another news from this week, $130 million were stolen from “DeFi” lending service. I mean, this stuff just happens again and again, and OP is asking if DeFi is the future of banking?

 

Your view is shared with Jim Cramer of Mad Money, though his reason is simple: I’m holding onto my Ethereum because I believe there could be millions of greater fools out there. I think that’s a decent bet.

 

If you follow some of the crypto groups on reddit, you will however come across a lot of sad posts, one guy had cashed in his 401k and put it all in crypto, another guy had liquidated his college fund, put in Doge, and now had no money for college, etc.

 

Honestly, I think I am starting to believe that crypto really is cancer for our society, it wastes a tremendous amount of resources, and *a lot* of people will lose their life savings on this, in fact, they have already lost most of their money, because the liquidity is simply not there for people to realize their gains. Partly because when they bought, someone else cashed out (and took their money), partly because of the tremendous amount of money that goes to miners.

Once again I will say it, this is your view and opinion based upon how you want to spin what you see.  Stocks and all other instruments are and have been just as vulnerable to manipulation and speculation.  Crypto currency is the newest asset class and will be around for a long time like the others.

[lkn]

28 minutes ago, ThailandRyan said:

Once again I will say it, this is your view and opinion based upon how you want to spin what you see.  Stocks and all other instruments are and have been just as vulnerable to manipulation and speculation.  Crypto currency is the newest asset class and will be around for a long time like the others.

It is my opinion backed up with lots of reasoning and links, and there are lots of anchors for you to grab onto, if you actually want to engage in real discussion about the subject.

 

And what sort of stock manipulation are you talking about? Do you understand the difference between a productive and non-productive asset? How is crypto making money for the investor? Hint: Selling it at a higher price to another “investor”, i.e. greater fool theory (as even Jim Cramer, who holds and has recommended crypto, admits). Please provide your argument for how a non-productive asset that is not eventually sold to consumers (like e.g. soybeans or aluminium) can generate money in any other way than “buy high, sell even higher to another investor”.

Edited October 30, 2021 by lkn

[ThailandRyan]

1 minute ago, lkn said:

It is my opinion backed up with lots of reasoning and links.

 

What sort of stock manipulation are you talking about? And do you understand the difference between productive and non-productive assets? Which one is stocks, and which one is crypto? How is crypto making money for the investor? Hint: Selling it at a higher price to another “investor”, i.e. greater fool theory. Please provide your argument for why a non-productive asset that is not eventually sold to consumers (like e.g. soybeans or aluminium) can generate money in any other way than “buy high, sell even higher to another investor”.

You just identified the Thai Real estate market......

[lkn]

3 minutes ago, ThailandRyan said:

You just identified the Thai Real estate market......

Valuation of real estate was already explained in this comment. But there has certainly been speculative bubbles in real estate, and they tend to end really badly for a lot of people.

[ThailandRyan]

4 minutes ago, lkn said:

Valuation of real estate was already explained in this comment. But there has certainly been speculative bubbles in real estate, and they tend to end really badly for a lot of people.

And so did the Dot Com bubble, as well as Bernie Madiff....are you seeing similarities yet.  To take a downside, and have a view where a person believes that crypto is nothing more than a scam, can be used on any asset or speculative item.....

[lkn]

24 minutes ago, ThailandRyan said:

And so did the Dot Com bubble, as well as Bernie Madiff....are you seeing similarities yet

Bernie Madoff ran a ponzi scheme. The Dot Com stocks that crashed were effectively penny stocks: No assets or any business plan about how to make money, and back then, a lot of this was ridiculed by people who understood that you can’t make a company without a value creating product profitable through sheer volume — I fail to see what argument you are trying to make here? As crypto is basically the modern day penny stocks.

 

24 minutes ago, ThailandRyan said:

To take a downside, and have a view where a person believes that crypto is nothing more than a scam, can be used on any asset or speculative item....

Again, I really don’t follow your argument. Is it that because the Dot Com crash happened, you think that “with my glasses” you could argue that all stocks are penny stocks? That is just ridiculous, because for every single stock, there is an underlying company with public financials and you would have to be an idiot to not understand how e.g. Coca Cola can make money by adding suger to water and selling it at a profit.

 

But for all this crypto, it is just vague insinuations, not a single person in this thread has given a concrete example of how value is being created in the real world, no business has been disrupted by crypto or has lost customers to blockchain services, no problems are being solved.

 

I write pretty long-form comments with arguments and links, and open questions, for example what exactly is the Mastercard/Bakkt partnership about? Who will benefit from this? And often the reply is just “you don’t get it” or something along those lines.

 

The internet disrupted lots of existing businesses, it had obvious business cases from day one, and all the money being made from the internet can easily be explained and fell to the shareholders of companies that provided services on the internet, or internet infrastructure. With crypto, the money being “created” is people buying dog-themed digital tokens and selling them at a profit (if they are lucky), how is this not just a fad like Beanie Babies?

 

Anyway, I think I waste way too much energy on this thread, as I think I already said, you can’t convince a man of something when his salary depends on him not understanding it: This seems very apt about crypto, and I am very surprised someone like Cramer (who, as said, hold crypto) would admit on air, that this is actually just all a greater fools game, kudos to him!

Edited October 30, 2021 by lkn

[Jenkins9039]

On 10/1/2021 at 10:37 PM, Neeranam said:

I think many Commercial Banks will disappear/go out of business. 

Any thoughts? 

 

SCB is a major investor in DeFi and likewise Kasikorn is now going hard into it...

 

Plus half the SCB management are involved in crypto personally (heavily) - from personal knowledge).

[The Cipher]

10 hours ago, lkn said:

I know I am getting repetitive, but the value of crypto really just seems to be scamming other people.

Yeah the discussion is getting circular. I think we should just tie it off for now. I'll chime-in in the future if I read something that I feel strongly about enough to clarify/opine on. Feel free to ping me with an "I told you so" if the asset class goes to zero. Zero, mind you, no victory laps for random crashes ????.

 

I just cleared another bout of working abroad with my firm, so I expect to be in Bangkok from Dec through March next year. Can always hash this topic out over a beer at that time. I'm actually surprised at how easy it was to get them to agree this time.

 

Somewhat unrelated, but I'm still pretty determined to have a night out with the average AseanNow forumer (not saying that's necessarily you) to see Bangkok through their eyes. Huge point of fascination for me.

[Chad3000]

I'm not into it.

 

Each nations fiat money is bad enough but crypto is literally based on nothing. Rightly so, one commodity called Ethereum bc it exists only in the ether.

 

Investors...most big investors like Black Rock have free money given to them by the Fed. All the money from Musk is free. BTW he's pulled back on his position a long time ago. In and out.

 

I liken it to a Ponzi scheme.

 

For me, crypto is in fact much like fiat money but if I had a chance I wouldn't hold that either.

Edited October 30, 2021 by Chad3000

[Kinnock]

If looking backwards very long term, FIAT money has been a poor investment, as governments can simply print more.

 

My  view is that any system to hold your wealth needs to be based on a finite asset - such as gold, land, and I guess, Bitcoin too.

 

Any system to transfer value needs to be seen as a temporary convenience, and that aplies to DeFi and banks.  Get in, transfer, get out.

 

I think stablecoins will be the future of international financial transaction, but the banks will be involved to keep their snouts in the trough - and the national governments will legislate to ensure the banks are involved, to ensure they are not pushed out of the trough.

 

Taxing direct cryptocurrency transfers is too hard, so governments and their bank buddies will be involved, and 'safety' or 'security' will be their public excuse to stick their snouts deep into our funds.

[Neeranam]

16 hours ago, lkn said:

As crypto is basically the modern day penny stocks.

Bitcoin is $62,000. 

 

You are rapidly becoming the only person against cryptos, even staunch critics like Cramer, Mr Wonderful, etc have changed their minds. 

[lkn]

2 hours ago, Neeranam said:

You are rapidly becoming the only person against cryptos, even staunch critics like Cramer, Mr Wonderful, etc have changed their minds. 

I linked to what Cramer said about crypto in a previous post. Did you read it? He admits it is a greater fool’s game. You also brought up Mark Cuban in the past, did you see he lost money on a rug pull that he had endorsed four days earlier in a blog post?

 

You are basically saying that because a lot of TV personalities are into crypto, it must be good. But do you see any prominent computer scientists or economists who are endorsing it? Most in these fields simply ignore it, a few are vocal critics and have very thorough arguments about why it is bad. Here is a link to such criticism (PDF) from a computer scientist submitted to the S.E.C. related to the proposal of creating a bitcoin ETF. There is also EPIC CEO who tweeted that he will not touch NFT because it is a minefield of scams, you have Valve who will kick all “blockchain” games from their Steam store, and recently the Game Developers of Australian said they will ban all job ads related to blockchain.  So people who understand this stuff thinks it is bad!

 

Edit: And as said in earlier post (with links): Both Microsoft and IBM are abandoning their blockchain efforts. It was just a fad!

 

You mention bitcoin reaching $62k, but my arguments have never been about price, money is pouring into crypto, look at RobinHood’s financials, they are making hundreds of millions of dollars selling Doge coin to the masses, but why are people buying doge coin? Because they think they can sell it to another fool at a higher price. Doge coin will never be an actual currency, it was created as a joke and doesn’t scale. When people are trading the currency, they do so on centralized exchanges, not on the blockchain itself.

 

So what do you think will happen with all these coins that people are buying? You think they will continue to go up in value? Where does the value come from? Explain these things, rather than bring up names of TV personalities who have talked positively about crypto, and when you do bring up TV personalities, at least check what they have actually said, and if they have been caught endorsing scams, take e.g. this post lamenting Kim Kardashian for endorsing Ethereum Max to her 200 million followers, after which the coin of course tanked. That post also mentions other influencers who have endorsed crypto, several of which who have later been fined for doing so.

 

So @Neeranam, did you start this thread to have an informed discussion? Or do you just want us to discuss crypto by quoting the price of bitcoin and the latest influenser who has talked it up?

 

If you want informed discussion, what do you say to this report that every single bitcoin transaction costs $200? Or that the blockchain only handle 3 transactions per second? Or the extreme gas fees on Ethereum making this guy pay $93 to send $100?

Edited October 31, 2021 by lkn

[mjnaus]

2 hours ago, lkn said:

Or the extreme gas fees on Ethereum making this guy pay $93 to send $100?

I don't mind shining some light on this one. 

 

This might sound strange to someone such as yourself, however high gas fees on the L1 is actually GOOD. It's a sign that the blockchain is working. 

 

Let me unpack that for you. All an L1 blockchain does is sell block space, ie a secure, immutable place to write data to. This blockspace is sold through free market mechanisms on the Ethereum network; it's determined by supply and demand. The fact that gas prices are high simply indicates that demand is outpacing supply. I, for one, take that as an indication that Ethereum is doing something right. 

 

Moving forward, Ethereum's L1 won't be the place where you transfer $100 worth of stable coins to someone, where you mint NFT's or settle other tiny transactions. All those lower transactions will be moving to L2 (real L2's like optimistic or zk roll-ups) or side chains (like Matic) where your transaction fees will be close to zero. The L1 will more and more establish itself as the main settlement layer for roll-up settlement and large transactions. 

 

It's been long predicted that every L1 that becomes succesfull, ie reaches product/market fit (as is indicated by having full blocks) will see it's transaction fees rise. This is why most people in the Ethereum community don't see this as a big deal. The ONLY way to keep transaction costs low on the L1 is to increase throughput to such an extend that you'll be sacrificing either scalability or security (the blockchain trilemma).

 

Another interesting side effect of high gas costs.... it actually benefits ETH holders. Since IEP1559, about 80% of the transaction fees is being burned (ie destroyed). This puts deflationary pressure on the L1 asset and therefor tends to drive its price up. Since IEP1559 went live, 699,462.05 ETH has been removed from circulation (just over $3bil with the current price). 

[lkn]

18 minutes ago, mjnaus said:

The ONLY way to keep transaction costs low on the L1 is to increase throughput to such an extend that you'll be sacrificing either scalability or security (the blockchain trilemma).

If I may restate your comment and see if you agree:

 

Claim: The price building the blockchain should be proportional with the value secured by the blockchain.

 

For example, if I want to receive $10M worth of ETH on the chain (for “services rendered”), and I want to have reasonable assurance that after a day, it is unfeasible for my counterparty to double-spend this amount, it should cost at least $10M to build one day’s worth of blocks (otherwise my counterparty could spend less to fork the chain). Do we agree on this?

 

If users have to pay for this, and we do 1M transactions per day, it naturally follows, that each transaction must cost at least $10. Are we still in agreement?

 

[lkn]

13 hours ago, The Cipher said:

Feel free to ping me with an "I told you so" if the asset class goes to zero. Zero, mind you, no victory laps for random crashes ????.

I actually don’t think it will ever go to zero *unless* regulators step in and shut it down, but this will be very very difficult.

 

Before Bitcoin we had Liberty Reserve (which ran from 2006-2013), and it took a dozen or so agencies from multiple countries to shut it down, so there is demand for a censor resilient transaction network.

 

Of course this is normally only needed by people breaking the law, e.g. buying drugs online or accepting ransomware, but sometimes it’s a greyzone, like adult entertainment, cannabis dispensaries in the U.S., or people moving funds out of Thailand, which may not necessarily have been obtained through illegal means, but where the required paperwork is just not feasible to obtain.

 

Regarding bitcoin as investment though, it is important to understand who is creating the value, for example if we use it to move money out of Thailand, we “gladly” pay a transfer fee to the miner, a percentage to the guy who sells us the bitcoins in Thailand, maybe a cut to the website we used to find this local trader and who may provide escrow, and then a fee to Coinbase when we exchange and withdraw our money in our own country.

 

A bitcoin could be $1 or it could be $100k, it doesn’t matter for those who are using it as a currency, on the contrary, the more volatile the currency is, the less useful it is as a currency.

[lkn]

13 hours ago, Kinnock said:

If looking backwards very long term, FIAT money has been a poor investment, as governments can simply print more.

Currency in itself should not be an investment.

 

Said in a very simplistic way, as long as a country does not have full employment, there is potential value to be created by making these people productive.

 

But to make more people productive, we may need to build factories, stores, invest in equipment, education, inventory, or similar.

 

If putting your money in the bank would give you e.g. a 5% yield, people with excess capital would be hesitant to risk their money on these investments, because why risk losing all your money when you already get a good return with zero risk?

 

This is rational for the individual, but for society in general, lifting people out of poverty and increasing GDP tends to be a good thing, and if in this process you also increase your export, your currency is going to increase in value, but of course that is only relative to countries who do not have similar growth.

 

And that is why deflationary currencies (as we currently see with many crypto coins) is a really really bad thing, because it will put a stop to investments.

 

13 hours ago, Kinnock said:

My  view is that any system to hold your wealth needs to be based on a finite asset - such as gold, land, and I guess, Bitcoin too.

To hedge against inflation, an asset with non-decreasing demand is generally a good thing. When I was in Zimbabwe during their previous hyper inflation, people withdrew their full salary (when the bank had money) and spent it all on oil, flour, and other nonperishable items.

 

Of course if you have more money than a Zimbabwean worker, putting it all in flour is probably not the best idea, personally I would rather put my money in a productive asset than a non-productive asset, and if I were to put it in a non-productive asset, I would be sure I understood why demand for this asset is not going to decrease, here real estate / land seems very well understood.

[Neeranam]

 https://banyanhill.com/defi-destroy-banking-system/

 

Interesting story

[GrandPapillon]

On 10/28/2021 at 2:31 PM, fdsa said:

I don't know if DeFi would kill banks or not, but I know for sure that the "blast from the past" system from 70's called "SWIFT" must perish.

Today I had to make a SWIFT transfer of 100 EUR and paid 45 EUR transaction fee.

Yes, that's 45% fee.

 

what kind of idiots make a 100 EUR transfer using SWIFT? nobody, and I call bull on your claim here, just to illustrate your love of cryptos :)