pull down to refresh
15 sats \ 4 replies \ @Brunswick 12 Jul 2022 \ parent \ on: If You Aren't Trying to be Money, Why Do You Need a Coin? bitcoin
DeFi is the natural next-step in cryptocurrencies, be it good or bad.
There are two kinds of currency: hard-assets and debt-assets. One is money, the other is a form of currency, both are assets.
The reason fractional reserve is even possible is that people accept 'debt notes' as a more convenient medium of exchange than the supposedly underlying hard asset. Its through the acceptance of this fungible debt as a currency that the fractional-reserve funny-business is enabled.
We have hope that people will not accept 'bitcoin-backed' currency over bitcoin itself since there is little benefit to using the proxy-currency rather than the hard-money itself. This does not prevent banks from attempting to issue a 'bank note' rather than the bitcoin sats themselves when a person takes out a loan, but the frictionless of the hard-asset bitcoin makes this business model very unstable.
If a bank or defi can find a way to 'lock up' bitcoin in 'checking' accounts, this will enable them to lend out more sats than they have on deposit. This is possible if their clientele are willing to buy and sell within the captive bank accounts. Seekers of debt (lendees) may be willing to participate in this system due to this ability to get your hands on 'cheap bitcoin'. This places the long-term viability of bitcoin itself as a hard asset in question. All that's required in the end is (through the use of force) to disconnect the debt-asset from redeemability for bitcoin and make it only redeemable for more debt and this brings us right back to where we are today with dollars.
That would be a nightmare scenerio and as such, I think its important to establish a culture that would reject such attempts to prevent it from happening in the first place. Things like "not your keys not your coins" have been good for this.
reply
Unfortunately that nightmare scenario is exactly where Dorothy's silver slippers on the 'yellow brick road' have lead us. People became ignorant, complacent and easily deceived (or maybe always were). It may have taken one or two generations and a few meat-grinder wars to pull it off, but here we are.
reply
Only if we accept it and as Bitcoin maxis, we don't accept it.
Here's a nice script another stacker news user created: https://github.com/j4imefoo/nokyc
reply
I agree, on principal I wouldn't accept captive bitcoin; Not my keys, not my coin. But I doubt the average dolt understands that he and his associates are destroying the world by doing so. The problem with fractional reserve banking is that it doesn't require the government to make it possible. It only needs the government to make it stable. The reason it exists at all is that it makes possible 'cheap' money with lower interest rates than are possible with full-reserve banking. We as bitcoiners hope to make bitcoin so simple that everyone will use it. That's the whole point of it, its a better deflationary alternative to the government issued debt-backed currency, but it only works if everyone understands why its valuable. Nothing works if it depends on everyone adopting a certain ideology. Christianity wouldn't be here today if the early Christians said their faith is only valid if everyone believes the same as them. Bitcoin, like Christianity, if its going to 'work' it needs to withstand diversity of thought.
As I said earlier, the 'out' we have from creating a new fractional reserve currency based on bank-issued bitcoin-backed debt notes is that bitcoin is 'easier' to hold, to store, and to transfer than a bank issued currency. Bitcoin likely will win out on its merits alone, but we should be standing ready to call it out with a full understanding of what they are trying to pull-off when something like this does finally emerge.
reply