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Could the US Dollar Be Crypto's Killer App?

28 points by benmdi 6y ago

tw04 6y ago
No, it couldn't. Unless the rest of the western world is ready to roll the dice on whether China and Russia want to expand their empires - they aren't moving away from the dollar. I have no doubt after the Trump administration they are all taking a long, hard look at building up their military power to be self-sufficient, but those timelines are measured in decades, not months. Anyone who thinks that moving away from the dollar is a simple matter of currency is naive, delusional, or both.
- shadowgovt 6y ago
  The key point in the article is that crypto (not BTC, but stablecoins pegged against dollar, euro, and/or yen values) offers a way for people who normally have few ways to access dollars to get their hands on them. It's not about the dollar-using world moving to crypto---it's about the citizens in world that doesn't use a currency strong enough to print their way out of a market implosion moving to the dollar via crypto.
  - tw04 6y ago
    But they aren't getting their hands on dollars, they're getting their hands on crypto claiming to be tied to the dollar. Tether did the same - until they didn't. You can't be tied to the dollar without backing your coin with dollars. You can't possibly back your coin with sufficient dollars without US government approval. You aren't getting approval without following the same regulations as any other bank, which is what made getting dollars difficult in the first place. Which means the only alternative is attempting to supersede the dollar by pegging to it but not actually being backed by it. Which, again, will never happen.
    - shadowgovt 6y ago
      I agree. It might work, but I think that in the short run, it won't be trusted if there isn't a mechanism to funge those stablecoins into actual, mattress-stuffable USD.
    - benmdi 6y ago
      > You can't be tied to the dollar without backing your coin with dollars. Not exactly. There are projects like Maker and sUSD which create synthetic dollar equivalents via collateralization with native crypto assets. (Caveat here, Maker did recently add USDC, an IOU backed stablecoin, as collateral as an emergency measure. Unclear if that change will be permanent or not).
    - PKop 6y ago
      Exactly. Not sure how one could write this article without mentioning the risks of so-called stable coins. Quite simply, the huge existential risk is that the currency peg isn't maintained, for all sorts of reasons relating to trust, actual $ supply, regulation, centralization, politics, etc. Simply proclaiming the stability of something doesn't guarantee it, or absolve one of tackling all the same problems of currencies in general. Else, a nation would simply call their own currencies "stable" and back them with $ reserves, which they already try to do. Also, it is extremely stupid to say that a real-asset backed "crypto" somehow eliminates censorship. The "backing" is the only real item of value in this equation, and getting ones hands on that asset is of course vulnerable to censorship.
- deleted 6y ago
  [deleted]
SideburnsOfDoom 6y ago
At guess, "No" https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headlines https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headline... after reading the article ... still "No".
- georgyo 6y ago
  Never heard of betteridge before, and was thinking the answer to headlines is normally yes... The Wikipedia article you link to states a study of ~3000 articles where the most common answer is infact yes.
solotronics 6y ago
I have been wondering why the US doesn't make a trial crypto dollar. If it doesn't work out what is the cost? Relatively nothing. If it does work out? it would strengthen the USD position as the global settlements layer and give the US control over a new monetary domain. For examples of this see LIBOR/"Eurodollar"
- shadowgovt 6y ago
  The US government is generally hyper-conservative in the financial space of what the Fed directly controls for myriad reasons. The bank of computers that reconcile transactions between banks still shuts down on the weekends because the law around its operation is based on the old law where human clerks were doing the reconciliation. The cost if it doesn't work out is damage to the trust in the system and the stability of the dollar in general, which is the thing the Fed pathologically seeks to avoid. And as the country that can mint the currency the IMF designates other countries' international debts in, the US doesn't generally see itself in need of further strengthening the USD's position in the world. (Interestingly, when I lay it all out like that and add it up, the US monetary policy looks like a big business's bureaucratic system, the kind that'd be ripe for disruption by a startup. Of course, it's not quite so simple when we're talking nation-states and not Silicon Valley ventures).
  - npo9 6y ago
    > Interestingly, when I lay it all out like that and add it up, the US monetary policy looks like a big business's bureaucratic system, the kind that'd be ripe for disruption by a startup. Of course, it's not quite so simple when we're talking nation-states and not Silicon Valley ventures That’s because governments have the privilege of establishing itself as a monopoly. They control the rules of the marketplace via regulations.
- ashtonkem 6y ago
  Why? What extra functionality does creating a cryptocurrency enable?
  - 6y ago
coinward 6y ago
Arent stable coins just an appeal to central banks expansionary policy? Bitcoin was created as an alternative set of values and seems like cryptos killer app to me
- Retric 6y ago
  Bitcoin was created to solve micro transactions. https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for non- reversible services. It’s the community that pivoted to something else. PS: Two different non reversible transactions sets up the two generals problem which bitcoin does not solve. https://en.wikipedia.org/wiki/Two_Generals%27_Problem https://en.wikipedia.org/wiki/Two_Generals%27_Problem
  - 3fe9a03ccd14ca5 6y ago
    The average bitcoin transaction cost was over $1.50 last month, and it can only handle a maximum of about 7 transactions a second. Why would bitcoin be good for small transaction? https://ycharts.com/indicators/bitcoin_average_transaction_fee https://ycharts.com/indicators/bitcoin_average_transaction_f...
    - Retric 6y ago
      The theory was bitcoin would have low overhead as the only limit was machine time which should be cheap. However, an artificial transaction limit was created which creates artificial scarcity and thus high transaction fees. In theory a miner wants to have the highest number of profitable transactions possible, but we ended up with collusion to drive up prices and thus miner proffits.
      - sarakayakomzin 6y ago
        >However, an artificial transaction limit was created ? there's nothing artificial about a transaction limit. it is p2p and fault tolerant, and there's no such thing as unlimited data storage yet. this is by design.
luxuryballs 6y ago
Increasing the number of people using the dollar is at least a clear goal considering how often we inject it into countries and governments around the world. In 2020 you don’t conquer with guns, you conquer by economic dependence.
- hef19898 6y ago
  To be fair, it always was a combination of both. Economic depndence is much safer so.
0x8BADF00D 6y ago
The killer app was supposed to be DAOs, ICOs, and decentralized finance/web 3.0. Instead we got another asset bubble. This is why we can’t have nice things.
- deleted 6y ago
  [deleted]
- HashThis 6y ago
  Back in the day of dial-up modems, people dreams of watching TV over the internet. Didn't work well with dial-up. As infrastructure spread, it happened (NetFlix). Crypto going mainstream will happen. It will happen when debit cards to crypto accounts will pay merchants, and the merchants receive USD. AND when the rates are tiny.

28 points by benmdi 6y ago

tw04 6y ago

No, it couldn't. Unless the rest of the western world is ready to roll the dice on whether China and Russia want to expand their empires - they aren't moving away from the dollar. I have no doubt after the Trump administration they are all taking a long, hard look at building up their military power to be self-sufficient, but those timelines are measured in decades, not months. Anyone who thinks that moving away from the dollar is a simple matter of currency is naive, delusional, or both.

shadowgovt 6y ago
The key point in the article is that crypto (not BTC, but stablecoins pegged against dollar, euro, and/or yen values) offers a way for people who normally have few ways to access dollars to get their hands on them. It's not about the dollar-using world moving to crypto---it's about the citizens in world that doesn't use a currency strong enough to print their way out of a market implosion moving to the dollar via crypto.
- tw04 6y ago
  But they aren't getting their hands on dollars, they're getting their hands on crypto claiming to be tied to the dollar. Tether did the same - until they didn't. You can't be tied to the dollar without backing your coin with dollars. You can't possibly back your coin with sufficient dollars without US government approval. You aren't getting approval without following the same regulations as any other bank, which is what made getting dollars difficult in the first place. Which means the only alternative is attempting to supersede the dollar by pegging to it but not actually being backed by it. Which, again, will never happen.
  - shadowgovt 6y ago
    I agree. It might work, but I think that in the short run, it won't be trusted if there isn't a mechanism to funge those stablecoins into actual, mattress-stuffable USD.
  - benmdi 6y ago
    > You can't be tied to the dollar without backing your coin with dollars. Not exactly. There are projects like Maker and sUSD which create synthetic dollar equivalents via collateralization with native crypto assets. (Caveat here, Maker did recently add USDC, an IOU backed stablecoin, as collateral as an emergency measure. Unclear if that change will be permanent or not).
  - PKop 6y ago
    Exactly. Not sure how one could write this article without mentioning the risks of so-called stable coins. Quite simply, the huge existential risk is that the currency peg isn't maintained, for all sorts of reasons relating to trust, actual $ supply, regulation, centralization, politics, etc. Simply proclaiming the stability of something doesn't guarantee it, or absolve one of tackling all the same problems of currencies in general. Else, a nation would simply call their own currencies "stable" and back them with $ reserves, which they already try to do. Also, it is extremely stupid to say that a real-asset backed "crypto" somehow eliminates censorship. The "backing" is the only real item of value in this equation, and getting ones hands on that asset is of course vulnerable to censorship.
deleted 6y ago
[deleted]

SideburnsOfDoom 6y ago

At guess, "No" https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headlines https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headline... after reading the article ... still "No".

georgyo 6y ago
Never heard of betteridge before, and was thinking the answer to headlines is normally yes... The Wikipedia article you link to states a study of ~3000 articles where the most common answer is infact yes.

solotronics 6y ago

I have been wondering why the US doesn't make a trial crypto dollar. If it doesn't work out what is the cost? Relatively nothing. If it does work out? it would strengthen the USD position as the global settlements layer and give the US control over a new monetary domain. For examples of this see LIBOR/"Eurodollar"

shadowgovt 6y ago
The US government is generally hyper-conservative in the financial space of what the Fed directly controls for myriad reasons. The bank of computers that reconcile transactions between banks still shuts down on the weekends because the law around its operation is based on the old law where human clerks were doing the reconciliation. The cost if it doesn't work out is damage to the trust in the system and the stability of the dollar in general, which is the thing the Fed pathologically seeks to avoid. And as the country that can mint the currency the IMF designates other countries' international debts in, the US doesn't generally see itself in need of further strengthening the USD's position in the world. (Interestingly, when I lay it all out like that and add it up, the US monetary policy looks like a big business's bureaucratic system, the kind that'd be ripe for disruption by a startup. Of course, it's not quite so simple when we're talking nation-states and not Silicon Valley ventures).
- npo9 6y ago
  > Interestingly, when I lay it all out like that and add it up, the US monetary policy looks like a big business's bureaucratic system, the kind that'd be ripe for disruption by a startup. Of course, it's not quite so simple when we're talking nation-states and not Silicon Valley ventures That’s because governments have the privilege of establishing itself as a monopoly. They control the rules of the marketplace via regulations.
ashtonkem 6y ago
Why? What extra functionality does creating a cryptocurrency enable?
- 6y ago

coinward 6y ago

Arent stable coins just an appeal to central banks expansionary policy? Bitcoin was created as an alternative set of values and seems like cryptos killer app to me

Retric 6y ago
Bitcoin was created to solve micro transactions. https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for non- reversible services. It’s the community that pivoted to something else. PS: Two different non reversible transactions sets up the two generals problem which bitcoin does not solve. https://en.wikipedia.org/wiki/Two_Generals%27_Problem https://en.wikipedia.org/wiki/Two_Generals%27_Problem
- 3fe9a03ccd14ca5 6y ago
  The average bitcoin transaction cost was over $1.50 last month, and it can only handle a maximum of about 7 transactions a second. Why would bitcoin be good for small transaction? https://ycharts.com/indicators/bitcoin_average_transaction_fee https://ycharts.com/indicators/bitcoin_average_transaction_f...
  - Retric 6y ago
    The theory was bitcoin would have low overhead as the only limit was machine time which should be cheap. However, an artificial transaction limit was created which creates artificial scarcity and thus high transaction fees. In theory a miner wants to have the highest number of profitable transactions possible, but we ended up with collusion to drive up prices and thus miner proffits.
    - sarakayakomzin 6y ago
      >However, an artificial transaction limit was created ? there's nothing artificial about a transaction limit. it is p2p and fault tolerant, and there's no such thing as unlimited data storage yet. this is by design.

luxuryballs 6y ago

Increasing the number of people using the dollar is at least a clear goal considering how often we inject it into countries and governments around the world. In 2020 you don’t conquer with guns, you conquer by economic dependence.

hef19898 6y ago
To be fair, it always was a combination of both. Economic depndence is much safer so.

0x8BADF00D 6y ago

The killer app was supposed to be DAOs, ICOs, and decentralized finance/web 3.0. Instead we got another asset bubble. This is why we can’t have nice things.

deleted 6y ago
[deleted]
HashThis 6y ago
Back in the day of dial-up modems, people dreams of watching TV over the internet. Didn't work well with dial-up. As infrastructure spread, it happened (NetFlix). Crypto going mainstream will happen. It will happen when debit cards to crypto accounts will pay merchants, and the merchants receive USD. AND when the rates are tiny.