What is Celsius?

[tecate]

Ah! so you have twisted for yourself that he did actually mean the currencies and not the technology. As I say, it would be unfair of me to try and disillusion you.

There's only one person doing the twisting here Duke - and it ain't me. How precisely is a crypto-startup to get to Amazon levels if there isn't crypto usage rising proportionately?

Did I predict Amazon? No. Did you? Do I think the DG is right that an equivalent of Amazon might arise from crypto technology? I don't think so but I could be wrong as I was for Amazon. The technology does actually add value and could spell a grim future for Lever Arch files, for example.
But I am not wrong that bitcoin (and all the others) are utterly worthless make-believe as currencies.

lol - so you're adding fine print now I see. Insofar as I remember, you are not conceding ANY use case for Bitcoin (aside from the lever arch file side swipe ). Meanwhile this dude running the $95 billion wealth fund does seem to think that Bitcoin will rise in the same way as Amazon did. But he just manages wealth in the real world - he's not an academic or 'nobel' who can't run anything in the real world.

I would have. There are lots of things I would have said could not happen. But if you think two tiny basket case economies with very dubious governance adopting bitcoin as an all-in bet for their impoverished nations outweighs the views of the leaders of 3 billion people ruled by two diametrically opposite ideologies; maybe you should pause to ask yourself are you indulging in a little self delusion.

Firstly there is no 'all-in' bet. Secondly, I went out of my way to bring to your attention that Bitcoin and its ecosystem has developed exponentially in every which way since discussions on the topic began here in late 2017/early 2018. Nation state adoption is only a small part of that progress.
And as regards leaning on an authoritarian, censorship-loving, freedom-suppressing, surveillance state, with your 'utterly worthless' claim, all that means is that bitcoin is the nemesis of such a regime. I'm quite happy to help you shoot your argument in the foot on that one.
As regards accounting for the US in your argument, last I checked it hadn't banned Bitcoin? And no, it doesn't need to declare it as legal tender. It's being ushered in - in the US - relative to other use cases.

 

[newirishman]

anyway - what the Celsius example (and some of the article) shows is that one of them key ideas of blockchain and currencies based upon the technology (cutting out regulators, build trust relationships) doesn't (yet? Ever?) work.
I guess the reason why there's banks and regulators and rules and 3rd party clearing houses (and lawyers) because you can't trust anyone.
people will (try) to screw you over quicker than you can add and entry to the bleedin' ... edge ledger.
And if you already need to bring in 'adult supervision' anyways, you might as well stick with your Euro's and Dollars.

7, 8 years or so ago I took part in a discussion around replacing the hierarchical internet cert trust system with blockchain.
From a technical point of view, it wouldn't have been that tricky. Is it available, or at least a proper RFC? Well, no.
Sure, certs are good money for those on top of the chain, but again: adult supervision....

 

[tecate]

anyway - what the Celsius example (and some of the article) shows is that one of them key ideas of blockchain and currencies based upon the technology (cutting out regulators, build trust relationships) doesn't (yet? Ever?) work.

You're commenting on centralised third party crypto lenders - who were offering yield where there was no natural or sustainable yield to be had and whilst implementing the worst risk management. That is not commentary on a decentralized cryptocurrency such as Bitcoin. Its fundamentals remain intact. If you'd like to criticise those centralised third party crypto lenders, then I'll join in. However, conflating it with the likes of Bitcoin is not accurate in any way, shape or form.

Other than that, what we've seen is that decentralised exchanges and protocols otherwise stood up fine during this drawdown. That said, these other L1/2 cryptos have plenty of work to be getting on with in terms of actual decentralisation or mechanism design (in the case of algorithmic stablecoins), etc.

I guess the reason why there's banks and regulators and rules and 3rd party clearing houses (and lawyers) because you can't trust anyone.
people will (try) to screw you over quicker than you can add and entry to the bleedin' ... edge ledger.

Absolutely - which is why Bitcoin comes out stronger as a result of this centralised lending nonsense. It's why there's renewed interest in self custody - which is healthy for crypto generally. Otherwise, it encourages folks working on those other decentralised projects that implicate market making, lending protocols, etc. - to double down and improve upon what they've built.

Centralised entitites will exist within crypto - but for precisely the reasons that you mentioned, they will have all the old legacy issues. That's a given.

7, 8 years or so ago I took part in a discussion around replacing the hierarchical internet cert trust system with blockchain.
From a technical point of view, it wouldn't have been that tricky. Is it available, or at least a proper RFC? Well, no.
Sure, certs are good money for those on top of the chain, but again: adult supervision....

My understanding is that work is ongoing on the various components required to make the internet truly decentralised. Clearly, this is not easy but it's a worthy goal. I'm sure they will get there eventually (and whether that involves blockchain-based solutions or something else, I don't care).

 

[DazedInPontoon]

anyway - what the Celsius example (and some of the article) shows is that one of them key ideas of blockchain and currencies based upon the technology (cutting out regulators, build trust relationships) doesn't (yet? Ever?) work.

nah, it shows that dependence on third parties to custody your assets introduces counter-party risk.

As an aside it's also a nice example against the economic statement that deflationary money is bad because no one will invest it.

I guess the reason why there's banks and regulators and rules and 3rd party clearing houses (and lawyers) because you can't trust anyone.
people will (try) to screw you over quicker than you can add and entry to the bleedin' ... edge ledger.

One big reason is because with digital fiat you *always* need to trust someone else, with crypto it's a choice since you can self-custody it.

And if you already need to bring in 'adult supervision' anyways, you might as well stick with your Euro's and Dollars.

I'll say it again, you don't need to with crypto, but you can choose to.

 

[Duke of Marmalade]

@tecate You don't listen to me. I have always said that bitcoin does everything it claims regarding digital entries on a blockchain. Rock solid ownership, instantly transferrable across borders, finite supply, censorship free, decentralised. Tick, tick, tick... The problem is that the digital entries are utterly worthless make-believe. I presume the DG means the technology might some day actually apply to something of worth (like CBDC) but honestly I do not know what his vision entailed - it certainly did not entail bitcoin becoming the next Amazon - but hey, dream on!
@DazedInPontoon I have not heard the economic statement that no one would invest in a currency whose purchasing power would increase. The opposite statement certainly.

 

[DazedInPontoon]

@DazedInPontoon I have not heard the economic statement that no one would invest in a currency whose purchasing power would increase. The opposite statement certainly.

No, I meant the idea people/entities holding a deflationary currency would not invest it in other things.

 

[tecate]

@tecate You don't listen to me. I have always said that bitcoin does everything it claims regarding digital entries on a blockchain. Rock solid ownership, instantly transferrable across borders, finite supply, censorship free, decentralised. Tick, tick, tick... The problem is that the digital entries are utterly worthless make-believe.

The trouble is I spend too much time listening to you. What I said was that you don't credit Bitcoin with any use case - and what you've done with your response is to suggest I've misunderstood you - and then say the very same thing with a different collection of words.

I presume the DG means the technology might some day actually apply to something of worth (like CBDC) but honestly I do not know what his vision entailed - it certainly did not entail bitcoin becoming the next Amazon

You keep claiming I suggested he said 'Bitcoin will become the next Amazon' when I'm on record as saying he didn't a gazillion times. Other than that, how precisely is a current crypto startup which is struggling through the bear market likely to get to Amazon status on the back of a CBDC that doesn't even exist yet? Oh wait your friends in Beijing kind of have one almost out in the wild. Maybe that's what you mean - CommieCoin.

 

[tecate]

No, I meant the idea people/entities holding a deflationary currency would not invest it in other things.

Bitcoin represents base layer money - that people can self custody and not have stolen from them (either through inflation or a bank failure, currency failure, government failure/seizure, etc.). It allows people to retain value that they've likely accumulated through their own hard work. Beyond that, it's reasonable to consider that other investment options that go further out the risk curve will be considered by the very same people.

Those DeFI options may be built directly on top of Bitcoin - or they may be built (as per the majority of current examples) on another blockchain.

 

[Duke of Marmalade]

No, I meant the idea people/entities holding a deflationary currency would not invest it in other things.

Apologies. That point was made by some lady that @tecate linked us to. I think she was arguing who needs Celsius with a currency with a low inbuilt inflation.

 

[Duke of Marmalade]

@tecate I see no use case for bitcoin as a currency. But I understand the open source can be used for facilitating such things as smart contracts. I have never denied it. It is a genuine added value but it is difficult to see how holders of bitcoin will derive any revenue from these use cases.

 

[tecate]

Apologies. That point was made by some lady that @tecate linked us to. I think she was arguing who needs Celsius with a currency with a low inbuilt inflation.

You're referring to Caitlin Long, CEO and founder of Custodia Bank. Her argument is that there is sufficient upside in having a position in Bitcoin as it goes through the phases of adoption without going way out the risk curve and placing funds with the likes of Celsius who engage in fractionally reserving deposits and using leverage....as she alludes to in this Twitter thread here. It makes for a good read - and is equally relevant to other commodities like gold where the conventional system misrepresents by issuing paper products with no underlying to meet them. The recent crypto lender insolvencies will see a greater proportion of folks self custodying - which is important in tackling rehypothecation and leverage.

@tecate I see no use case for bitcoin as a currency. But I understand the open source can be used for facilitating such things as smart contracts. I have never denied it. It is a genuine added value but it is difficult to see how holders of bitcoin will derive any revenue from these use cases.

What use case do you see coming out of smart contracts relative to Bitcoin? Just so that you are aware, Bitcoin isn't really regarded as a smart contract blockchain as the code is very limited (deliberately so) although a recent code update may lead to greater scope for smart contracts on Bitcoin. Ethereum has been the dominant smart contract network thus far (although it's still not a done deal that this is where all smart contract development will continue going forward).
As far as I'm concerned, Bitcoin still continues in its development as a means of payment and international settlement, a store of value and a hedge against the fiat system. It's also a risk-off asset by design even if it's being treated as a risk-on asset right now...this will change.

 

[Duke of Marmalade]

@tecate I tried to follow Caitlin's Twitter conversation. I don't like Twitter - its very abbreviated style (RV etc.) makes it difficult for a non Millennial like myself to follow.
I get the impression that in December she was predicting some Celsius style disaster, is that correct? If so, she got that right.
She argues that leverage increases supply and thus reduces price. Was she predicting that on the shake-out of leverage that bitcoin would rise to its "natural" price. If so, she got that badly wrong.

 

[tecate]

@tecate I tried to follow Caitlin's Twitter conversation. I don't like Twitter - its very abbreviated style (RV etc.) makes it difficult for a non Millennial like myself to follow.
I get the impression that in December she was predicting some Celsius style disaster, is that correct? If so, she got that right.

She's been harping on about rehypothecation / leverage relative to Bitcoin for years. That Twitter thread is from December - but here's a Forbes article she wrote on the subject in 2018.

She argues that leverage increases supply and thus reduces price. Was she predicting that on the shake-out of leverage that bitcoin would rise to its "natural" price. If so, she got that badly wrong.

I think she's thinking on a more long term basis here. It stands to reason if Bitcoin is fractionally reserved then it's not half as finite as it should be. This is how gold was captured by the banking set. Most people believe that there isn't enough underlying to cover all paper gold products.

 

[Duke of Marmalade]

I think she's thinking on a more long term basis here. It stands to reason if Bitcoin is fractionally reserved then it's not half as finite as it should be. This is how gold was captured by the banking set. Most people believe that there isn't enough underlying to cover all paper gold products.

It certainly opens up an interesting area for debate. But how can you prevent uncovered positions (and therefore enhanced supply) in a decentralised environment?

 

[tecate]

It certainly opens up an interesting area for debate. But how can you prevent uncovered positions (and therefore enhanced supply) in a decentralised environment?

You mean in a centralised environment? Any Bitcoin on-chain is verifiable. Tweets 7-15 in her tweet thread cover it.

On a side note, do the Chinese also think that Bitcoin is 'utterly worthless' in this situation that is happening in China right now?

 

[Duke of Marmalade]

You mean in a centralised environment

No. As I understand it she is asking that the leverage in bitcoin should be less than 1:1. The blockchain or its miners or the protocol can't ensure that - by definition the leveraged positions are off chain. It is the sort of control that needs a central authority like the SEC or the Fed, anathema to the cult. But I may have that wrong. What is she looking for in regard to controlling the leverage?

On a side note, do the Chinese also think that Bitcoin is 'utterly worthless' in this situation that is happening in China right now?

Please do we really want to be dragged into citing incidents from China, El Salvador, The Central African Republic or anywhere else? I'm giving that rabbit hole a miss, but keep digging if that's where you get your kicks.

 

[tecate]

No. As I understand it she is asking that the leverage in bitcoin should be less than 1:1. The blockchain or its miners or the protocol can't ensure that - by definition the leveraged positions are off chain. It is the sort of control that needs a central authority like the SEC or the Fed, anathema to the cult. But I may have that wrong. What is she looking for in regard to controlling the leverage?

I think there's a misunderstanding here. I'm saying that this type of shenanigans is a feature of centralised entities. And in considering that, see her tweets 7-15. She believes that given the fact that Bitcoin will have a higher retail element with a much higher level of self custody, they're going to get caught out from time to time with this (or one time in a very big way). I think it will also be possible to put 'proof of reserve' type systems in place - given that Bitcoin can be easily audited.

Just as an aside, it's a common misunderstanding that everyone in this space is against regulation. That's not the case. There's nothing wrong with centralised entities being regulated provided said regulation makes sense. Long has worked with law/policy-makers in Wyoming to create progressive digital asset regulation that forbids rehypothecation of digital assets.

Please do we really want to be dragged into citing incidents from China, El Salvador, The Central African Republic or anywhere else? I'm giving that rabbit hole a miss, but keep digging if that's where you get your kicks.I'l

I think it's a very reasonable and important point, Duke. The regime that is telling us that Bitcoin is 'utterly worthless' is then supporting a regional bank in defaulting on people's life savings and crushing their right to protest. I'll answer the question for you and for them. In this situation, self custodying Bitcoin would be utterly priceless.

 

[Duke of Marmalade]

@tecate well I suppose a 70% hit is better than 100%. One up for bitcoin, it beats deposits in some obscure Chinese bank.

 

[DazedInPontoon]

It certainly opens up an interesting area for debate. But how can you prevent uncovered positions (and therefore enhanced supply) in a decentralised environment?

One neat thing is that the nature of crypto allows for proving "proof of reserves" to the public in an easier way than most anything else. So if a company is really saying that have all client funds on reserve they should be proving it. Kraken is one such exchange that does: https://www.kraken.com/proof-of-reserves

This allows clients to confirm themselves that their are reserves backing their balance on the exchange.

 

[tecate]

@tecate well I suppose a 70% hit is better than 100%. One up for bitcoin, it beats deposits in some obscure Chinese bank.

That's disingenuous Duke. Once again, for the gazillionth time, you're cherry picking the worst of timeframes. Bitcoin yearly lows tell a different story:
2012: $4 2013: $65 2014: $200 2015: $185 2016: $365 2017: $780 2018: $3,200 2019: $3,350 2020: $3,800 2021: $27,734

Firstly, we're talking about 4 banks - not one. In what way are these banks 'obscure'? They may be 'obscure' to you as you don't live in Henan Province, China. Bitcoin is a global asset - what happens in other corners of the world is entirely relevant. And particularly so in a discussion where you are relying on the views of the Chinese regime re. Bitcoin whilst its foot soldiers stamp out protest from the deposit holders that have lost their life savings in these cases.