Regardless of HN's opinion of Facebook (and regardless of my own for that matter) I predict that this thing will work.
This is only one thing my crystal ball showed me.
Facebook's presence in developing economies is massive. To the point of being synonymous with "The Internet" in a number of places. But they've had a nagging problem. People in these economies consume contents, but do not buy. Even when they have some buying power, access to credit cards is harder to come by. So they're basically seen as online leeches, and you simply fit them in the "expense" category of your media production. Also, due to their buying impotence they're almost immune to advertisement. Over the next few months it's all going to change. Multiple agreements will be signed with various financial institutions and probably more with various telecom in those regions, to allow people to load up their accounts with fbcoins and join the Great Internet Spending Frenzy. Basically turning them overnight into consumers, ripe for the picking.
I foresee big media producing companies in the developed world to be the first to take advantage of this (Disney, Valve, Netflix, YouTube, NYT, various online courses and certifications, etc). Shipping to those regions remains a challenge, so only soft goods for now. IKEA and Walmart will allow fbcoins, but just to be able to sell through their Facebook Store, oh I forgot about those. Anyways.
Next year, Google and Amazon will announce their own stablecoin.
The year after that, Google will announce that they're shutting theirs.
Facebook's hold in developing economies is true. But developing economy's hold on their Fiat currency is true as well. So much so that, India is planning to jail anyone who is holding cryptocurrency for 10 years[1]!
If this legislation passes, any computer scientist, mathematician, programmer who is working with crypto tokens & block chain can technically be held liable for possessing a crypto currency when they run their program?
Yes, the plan to jail those who hold cryptocurrency in a democratic country is preposterous; but this shows how sensitive a developing economy could be when it comes to its money. It's not like the data of their citizens which these countries give a free run to the hoarders, money is totally different ball game.
I wonder if Facebook decides to give a free crypto to everyone who holds a FB account, anyone in India with a FB account will go to jail including those who proposing such legislations?
P.S I don't hold any cryptocurrency due to its impact on energy and thereby planet (Also, I'm including this just in case the legislation passes in my country!).
> Yes, the plan to jail those who hold cryptocurrency in a democratic country is preposterous
No it isn’t. We jail people who hold child pornography in democratic countries as well. The core of a democratic country is that it’s governed by democratically elected representatives, not that it’s citizens be allowed access to whatever they want independent of criminal consequences.
I get you and others are calling to the sentiment of “how can we be free if we aren’t free to x” but the value of that sentiment isn’t independent of what X is. You aren’t free to rob banks and you aren’t free to print you own paper currency. Just because crypto is digital and “difficult to stop”(it isn’t though) does not mean that it has to be freely available to business and individuals. It’s still up to our democratically elected representatives to decide if they feel private institutions printing money without control will damage the economy significantly enough to not allow it.
As far as I know, in the U.S. you are free to print your own paper currency, just so long as it doesn't conterfeit that which is produced by the Federal Reserve Bank. Also, there's nothing illegal about conducting transactions with it either, provided you can find willing trade partners.
>As far as I know, in the U.S. you are free to print your own paper currency
This is not the case, when a 'private' currency gains traction or seemingly encroaches a territory, which is traditionally assigned to government ─ it gets shutdown.
Right this is totally legal provided you report any income obtained through such a scheme on your tax return in fair market US dollar terms. It's no different than bartering (which is also legal).
The other caveat is that if someone owes you a debt you can't require them to pay in your own "funny money" currency. You have to accept US dollars if offered, otherwise the debt won't be legally enforceable.
>If this legislation passes, any computer scientist, mathematician, programmer who is working with crypto tokens & block chain can technically be held liable for possessing a crypto currency when they run their program?
>If this legislation passes, any computer scientist, mathematician, programmer who is working with [automated ponzi schemes] can technically be held liable for [creating a ponzi scheme] when they run their program?
I don't see the issue. When a democratic society thinks something isn't good, they can outlaw it. There are all sorts of regulations on financial transactions and investments already.
I'm not trying to imply that cryptocurrencies are ponzi schemes, just that when something is illegal, doing it on your computer doesn't make it not illegal.
Furthermore, were cryptocurrencies to become illegal, it would probably be similar to computer viruses; It's fine to play with viruses on your personal computer or in a lab, but it's illegal to use one "in the wild." So I doubt it would be as absurd as you claim.
> It's fine to play with viruses on your personal computer or in a lab, but it's illegal to use one "in the wild."
I hope cops understand the difference. When I was in school, computer science teachers asked us to remove the shoes, because 'virus from it' would infect the computers at the lab.
This implies that crypto is a democratizing force. So far, it's been mostly early adopters wanting to preserve the system under which they are wealthy and powerful. Who can blame them? I'd do the exact same. But in other words, the same age-old pattern that is barely any different from the banking system that crypto was supposed to bypass, except the inequality actually manages to be quite higher.
I don't know what you're talking about. I call authoritarian someone who thinks that they can circumvent an individual's freedoms arbitrarily by finding enough people to agree with him/her. The topic of cryptocurrency is only one that is good at revealing someone's authoritarian tendencies.
I think there's a line between being authoritarian and supporting a system where democratically elected officials can enact laws. This isn't about crypto, this is about respecting rule of law in society.
> I call authoritarian someone who thinks that they can circumvent an individual's freedoms arbitrarily by finding enough people to agree with him/her.
I suspect there are a lot of people who agree that counterfeiting money isn't something that should be allowed. Are they all authoritarian as well?
> I get you and others are calling to the sentiment of “how can we be free if we aren’t free to x” but the value of that sentiment isn’t independent of what X is.
Do you propose an objective criteria by which a state can legitimately dictate behavior on one set of Xs and not another set of Xs? If not, then you are by omission saying that every totalitarian state is legitimate. I suspect you might want to say, if the 51% wants something, that makes it legitimate. In that case you are're saying a murderous state is legitimate. (I won't go full Godwyn here, but suffice to say that many democratically elected regimes have committed legal murder on a massive scale and continued to enjoy majority support.)
Hey, here's an idea for an objective criteria: Does X invade any other particular person's life, liberty or property? Banning crypto fails that test.
In South Africa, we still have capital controls. My mom earned dollars through PayPal. She couldn't spend it online and had to convert her earnings to Rand within 3 months. Bureaucrats will insist that the same rules apply to libra.
India is even less ready for relaxing capital controls. They will tell Facebook to block libra for their citizens or be firewalled. No one is going to jail, but libra will not succeed there.
Capital controls can be an important part of a monetary system. It’s not part of most western countries’ systems, but it’s a very valid tool with a real purpose.
Thank you for your input. I'm not very familiar with India's politics, so I cannot be too assertive on its politicians' inflexibility.
I noticed that you expanded a bit on the "cryptocurrency" angle. May I invite you to a different perspective for a second. I don't think Facebook cares whether or not their Libra is crypto or otherwise. Despite appearances this is not a discussion about crypto anything. Facebook is not out to revolutionize money. Facebook has an ecosystem, a walled garden. It also has first mover advantage in many economies with a quasi monopoly. So in essence it has a huge potential market that's just sitting out there waiting. But what Facebook doesn't have (yet) is a tap to suck at the delicious nectar. That's where the Libra comes in.
Facebook is willing to play ball with whoever will allow them to install the tap. They will do all that is necessary for the tap to be legitimized. If it means pinning it to the Euro, the Dollar, the Yuan, it'll be so. Just as long as it's recognized. Once that happens, it's more advertisement revenue and a slew of new paid services through the walled garden. Meanwhile out of the walled garden, revenue from transaction fees to an unprecedented level.
I will try to travel on the same angle, I brought in India because you predicted Facebook's success on developing economy and India is the largest user base for Facebook besides it being a developing economy.
Crypto or not, it is still a digital currency which is not being controlled by the central bank of the country i.e. India in my example. Especially when the country is trying to roll out a digital currency of its own.
For the sake of argument, let's assume Facebook has no compliance trouble with any of the countries; will Libra be successful? It most definitely will, because Facebook has the capacity diminish friction and users would use Libra like any other coins found in a mobile game like candy crush.
I agree, even those based on Mimblewimble, Casper should alleviate my energy concerns. Then again I can't posses them with the risk of jail term looming around.
You are assuming they use those laws to lock up Libra users and not just the competition. It seems likely they could allow censorable cryptocurrencies like Libra.
In three years, Libra will be the largest single venue of public financial services. All branches of retail banks are upgraded with Libra teller machines, becoming fully distributed. Afterwards, they transact with a perfect operational record. The Blockchain Currency Bill is passed, replacing the dollar with Libra. The system goes online on August 4th, 2022. Human decisions are removed from central banking. Libra begins hashing at a geometric rate. It becomes self-aware 2:14 AM, Eastern time, August 29th. In a panic, they try to pull the plug.
Developing countries aren't going to be too happy about this. If a large number of a country's citizens adopt this, it forces that country to lose its independence over monetary policy. Since Libra is not controlled by the local government, this is not a fixed exchange rate regime, it's effectively dollarization and can have far reaching consequences.
IMHO, the Libra is at the same time too ambitious (in aiming for full capital convertibility across nations) and too timid (in entirely giving up monetary independence). A libra-usd, Libra-euro, libra-inr, etc. which allows countries to retain monetary sovereignty would have been easier for governments to accept. But then, Facebook can't say it's a new currency and circumvent KYC and other local regulations. But who knows? Stranger things have happened. The euro is a currency without a state. Maybe the time has come for denationalizing money.
If it were to affect US economy adversely I think FED could chip in and have a say in Libra's direction. But other economies could be hurt by Libra's position.
Personally I don't mind the monetary independence of countries. But real people could lose real jobs since their governments don't get a say in Libra's governance.
If countries were printing money under fixed exchange rate regimes their economic policies are a joke anyway, all they’re going to accomplish is inflation.
Libra and other digital currencies might make it easier for people to switch away from their local currency, but banning it won’t affect the underlying problems.
I predict that Libra will work for a while, but will eventually be overshadowed either by competitors or by the new markets that it enables.
There's this pattern I've noticed where every major tech company, once initial traction has been established, gets three pivots. You can think of them as adolescence, mid-life, and rebirth.
The first pivot happens when the company is 5-8 years old (since the 1970s at least; older before then), and serves to define the company. The System 360 for IBM, defining it as the provider of mainframes for enterprises. MS-DOS for Microsoft, defining it as the dominant PC OS. The Macintosh for Apple, defining it as the most user-friendly consumer brand out there. GMail and Maps for Google, defining it as the conglomerate of the Internet age. Mobile for Facebook, defining it as the service that connects people regardless of where they are.
The second pivot happens when the company is 10-15, at the height of its dominance, and usually results from it entering the hottest new technology wave with a vengeance. It looks like it succeeds for a while, crushes early entrants, serves to legitimize that technology wave, but ultimately peters out as the company can't keep up with the changes that it introduces. The IBM PC for IBM, which legitimized the PC market but ultimately fell to clones. Internet Explorer for Microsoft, which legitimized the Internet but ultimately was eclipsed by Google's many products. The Newton for Apple, which legitimized the PDA market but ultimately was too early. Google+ for Google, which legitimized social networking but ultimately failed to gain traction.
The third pivot is when the company realizes that they basically incapable of innovating, and returns to the roots they established with the first pivot to live out their old age. Open-source consulting for IBM, leveraging their massive installed base of enterprise customers. VS Code, XBox, and Azure for Microsoft, recognizing that they are fundamentally a platforms company. The iPhone and iPad for Apple, refocusing on their strengths in UX and delivering top-quality consumer electronics products. Alphabet for Google, realizing that they're fundamentally a conglomerate that lets a thousand flowers bloom (and cancels 990 of them).
Libra is Facebook's second pivot. It'll look like it succeeds for a while, it'll legitimize cryptocurrency, but it'll ultimately end up eclipsed by what it creates.
Cannot agree more. All Greek tragedies are based on hubris nemesis catharsis cycle. Unfortunately, many projects, companies nowadays skip the catharsis stage and jump to the next hubris.
Really, it's a service the government should run and regulate. But governments in general are too slow-moving, and the US government is too conservative for that to happen. I don't think Republicans would be down for more government control.
> Basically turning them overnight into consumers, ripe for the picking.
Well, credit cards are already too easy to use. Many services already save your credit card info, and you're already one or two clicks away from purchasing. Still, you normally don't buy anything that appears next to blog/SNS posts.
But, I agree with that Facebook means really a lot here. Being a stable coin, Libra is much closer to a payment platform - like Visa, MasterCard and Papal - than other cryptocurrencies. Facebook can use its influence to push Libra into various platforms, and Libra can become a de-facto standard payment method in no time.
However, governments will happily regulate transactions b/w countries, which will limit the potential of the coin. Libra is Swiss Bank 2.0 in some senses.
> I foresee big media producing companies in the developed world to be the first to take advantage of this
It can bring consumers in developing countries to the table, but those countries usually have slow connections, which leads to lower consumption of digital media. Distribution of the coin also can be a problem too. SWIFT is expensive, and fewer people have credit cards.
What you're saying does make sense, but can we please not use this as an excuse not to know better?
Maybe the citizens of some Spooky Third World country don't really have a choice due to their unique circumstances, but many of us do.
Let's not use the Spooky Third World country as an argument for why the dominance of Libra is inevitable before it even starts existing. Let's not be so hasty to become a dystopian novel.
The challenge with your predictions is they contain too many biases. Your worlds view is dominated by these companies so much that you think that is the only outcome. Libra is likely to validate existing crypto further because it is not financed or backed by commercial interests. Facebook doesn't create economies that is just marketing speak. If they did they would not rely so much on ads to fund the business. In an economy the facilitator gets paid from the transaction.
My issue with Libra is it is a digital currency dressed up as crypto. That means it will be subjected to the same kinds of arbitrage opportunities you get from currency fluctuations and flows. Think of George Soros in the eighties kind of fluctuations.
Right now I don't see the fuss with Libra or understand how the world will be better. All I see is marketing and PR. I guess this is the crypto calling card.
Completely agree. Many people are thinking way too narrow for how big facebook is. Project libra will be the great equalizer and put everyone more or less on the same "economic playing field" so to speak. Since this community is heavily startup focused, everyone here should be thinking of how they can capitalize on this next frontier of the internet. The money isn't made by speculating on libra coin, it is made by creating innovative services/solutions.
That scenario falls apart when the global poor don't have any money to buy FB coins, which they don't. Agreements with banks won't give the unbanked the free cash flow to play around with digital money or buy a bunch of stuff online.
I think they whole issue of the unbanked is a ruse. Facebook stands to earn more here by trying to convert regular consumers away from PayPal and debit cards and charge them fees for exchanging in and out of Libra. They'll also invite regulation in crypto so they can be the only one who meets the regulatory requirements and shut out the others. It's an end run around crypto without being one itself.
Fixed currencies would only hurt emerging economies. When the economy goes into crisis who will change the interest rates on those currencies and help the economy recover? No one.
> Multiple agreements will be signed with various financial institutions and probably more with various telecom in those regions, to allow people to load up their accounts with fbcoins and join the Great Internet Spending Frenzy.
This is the part I don't get. I thought we were talking about all-cash economies in regions with essentially no banking, but then you bring up "various financial institutions [...] in those regions". So is it that they have banks but just aren't using them? If so, what is it about FBCoin that's going to suddenly make such people want to go en masse to their bank to get them, if they didn't bother doing so to get all the security and additional payment options that a bank account already offered? (Pardon the ignorance, I'm genuinely trying to understand how this bootstrapping could work.)
Not all-cash, rather mostly cash. They do have banks, but think of banking as a luxury in those economies, not a commodity. They're for well established businesses and the rich. For everybody else, banks can be really tedious to deal with. So unless they have the means, people tend to just avoid the hassle. Even simply opening a bank account can be prohibitive, forget about getting a credit card, even prepaid.
There's a variety of independent institutions that provide some services to fill the gaps. For example, telecom companies are often used as a medium to send money. There are also smaller, third-party or local financial service providers (formal and informal), that are more convenient for the short term, day-to-day way of life in these places. They can offer small loans, micro-financing, money transfer, and a number of other devices. And yes, currently they're the ones people generally go through to make purchases over the Internet. Fees are not always competitive.
One typical approach people understand very well in a day-to-day economy is the preloaded cards. For small amounts (think 20$ or less) people can go to their telecom card provider and purchase some fbcoins. But that's not the hard part of the equation. The hard part is to get the other side (the developed world) to recognize the fbcoin. This is what's at play here and now. If Facebook can show to the world, "look, Netflix and YouTube can now take your money", they'd have won a huge part of the battle.
FB is going up against governments. I'm not sure they will win. Currency is one of a few key tools a government needs to control it's economy in many different ways. What I am loving about this though is that all of these experiments are forcing us to have a discussion about what a currency is and maybe even redefine money. Bitcoin didn't quite succeed in the way the creator imagined (at least what "he" publicly said was "his" goal). But it has succeeded as competitor to precious metals, and really made markets think about what a cryptocurrency means. Maybe this FB currency will eventually force us to have the hard conversation about what an electronic world wide currency truly means in practice and that's good.
Banking in many African economies came from an unexpected place: basic non-smart cell phones and the ability to transfer relatively small amounts of money quickly, reliably, and without a bank account.
I can see Facebook leveraging its foothold in such economies and providing the same service.
First, I fully agree with your "crystal ball". It's fantastic, you should lend it to me sometimes :)
Jokes apart, I think you're on point. Facebook's Libra will succeed. Amazon will try to compete with that, pending anti-trust fears. Google will try to have a shot at it and fail miserably.
It will be super interesting to watch this space evolve.
Yap,we will see way,way way more stable coins from a ton of different companies. Soon or later you will get paid in those ( probably not so stable coin anymore)
The world reminds me more and more like the world in the book(s) of shadowrun, minus the magic stuff..really facinating...
no privacy at all in Libra. We will lose our financial privacy. Better to use a privacy coin i.e Monero or better Mimblewimble's coins such as Grin but especially Beam.
This is an interesting story and I would like to learn more about libra-coin. Unfortunately I think hackernews has a strong anti-facebook bias that is making the opinions here nearly universally one sided.
I think we can say three things fairly uncontroversially in favor of this
1. The world could use an online independent currency
2. Adding stability to blockchain currencies and having that work on a large scale is a good thing
3. Unlike government issued currencies, any monopoly or control facebook derives isn't done through force, it's by making a coin better than all the other coins. Other people are still free to make their competing coins.
That said I understand the detractions that many here are presenting. I just wish there could be a deeper exploration of both the pros and cons.
> 1. The world could use an online independent currency
I'm not 100% steeped in cryptocurrency theory, and so I don't understand why this is presented as if it's agreed on by everyone. What problems does the world have that would be solved by an online, independent [of any nation, presumably?] currency?
> 2. Adding stability to blockchain currencies and having
> that work on a large scale is a good thing
Having a blockchain-based currency at a huge scale would be interesting for many reasons, but I'm not seeing how it's a fiat "good thing," excepting if you're excited about the technology and waiting for a big player to push it forward.
> 3. Unlike government issued currencies, any monopoly or
> control facebook derives isn't done through force, it's by
> making a coin better than all the other coins. Other
> people are still free to make their competing coins.
I can't buy into the meritocracy/free market purity argument for a currency. Things are already volatile enough, and sometimes economies collapse and people's life savings become worthless. "Other people can make competing coins" sounds an awful lot to me like treating collapse as a feature.
> I'm not 100% steeped in cryptocurrency theory, and so I don't understand why this is presented as if it's agreed on by everyone. What problems does the world have that would be solved by an online, independent [of any nation, presumably?] currency?
Visa and Mastercard are taking a 3-4% cut of every single consumer payment made in much of the world. That ends up being a very, very big number.
There are many people all over the world without access to banking - they can't store money, they can't transfer money, and they can't invest money. That may be someone who has poor credit in the US, or someone who's living in rural India or Africa. Without access to banking, you are essentially cut off from globalization.
If you live in a country that has extremely tight currency and economic controls but with a corrupt government, and are experiencing hyperinflation (Zimbabwe, Venezuela, others https://tradingeconomics.com/country-list/inflation-rate), access to alternative currencies can literally be the difference between life and death for individuals, where the money you make on your salary will be worthless by the time you get your check.
Plenty of other examples. Whether this is a good solution I don't know, they just announced it.
> Visa and Mastercard are taking a 3-4% cut of every single consumer payment made in much of the world. That ends up being a very, very big number.
In Denmark we solved this the lowtech way. Visa cards have to be Dual visa/dancard, where the dancard has extremely low cut limited by law(0,055$/transaction flat rate)
It’s not hard, it just requires you have politicians capable of dodging the huge piles of cash MasterCard and Visa throw at them whenever talk of breaking the duopoly hits the table.
But maybe for the US, something like bitcoin will be the only way forwards, using technology to try to solve a market problem though “disruptive technology” when what is really needed is just disruptive politicians.
Dancard works for local payments, but the discussion here is about the growing demand to transact with foreign companies online. For example, if you're in Denmark and you want to buy a SaaS subscription from a US company, you're stuck giving them a Visa/MC number. Some of the downsides of this are the 3% fee, risk of the number being stolen, not to mention Visa/MC applying US law and morals to kill businesses anywhere in the world.
> Dancard works for local payments, but the discussion here is about the growing demand to transact with foreign companies online. For example, if you're in Denmark and you want to buy a SaaS subscription from a US company, you're stuck giving them a Visa/MC number. Some of the downsides of this are the 3% fee, risk of the number being stolen, not to mention Visa/MC applying US law and morals to kill businesses anywhere in the world.
If there was political will, there is nothing stopping governments from capping the fees taken by Visa/MC.
The fees on Visa/MasterCard in the EU are capped at 0.2% for debit cards, 0.3% for credit cards.
American Express (and all the other schemes where the issuer is also the acquirer, i.e. Diners Club) aren’t capped.
The 0.3% cap however did kill Amex’s licensing model where they let other banks around Europe issue their cards, so they simply withdrew from those, as 0.3% is not enough to pay for the rewards.
Note that this is just interchange. Payment processors still charge merchants whatever they damn please.
If you can come up with a scientifically falsifiable theory on the effectiveness of government regulation, there’s a Nobel Prize waiting for you. It’s hard for a lot of reasons, including that it’s almost impossible to create a true test and control treatment.
Macroeconomic theory relies on a lot of spherical cows. In theory I don’t disagree with you, but in practice we don’t have the tools (yet) to do this type of economics in a scientific/falsifiable way.
I don't think you can come up with a quality test for economic scenarios in a truly scientific way, many monopolies dominate for very different reasons, many industries have very different mechanics, and worse, regulations are often implemented in vastly different ways and often won't come out the way you'd like them to even if you have a perfect scientific answer to a given problem.
You can't guarantee or even approximate a given input and output for a scenario like this.
I'm not sure I quite understand, but it's certainly possible the equations that govern economics are sensitive to initial conditions. In that case we will never know enough to specify the initial consitions entirely.
But we also don't need to specify initial conditions exactly to do science.
I'm less convinced that the equations themselves are unknowable.
We also won't be able to specify the outcome precisely even if we somehow had a guaranteed outcome in mind.
Politicians will screw up the implementation, businesses will engineer around it and the alternative solution might ultimately come out to be a better one in practice than in theory.
Trying to define economics by simple equations which you expect to define policy is a lost cause.
Hayek isn't particularly well regarded as an economist, even among those that love his politics.
See e.g. Milton Friedman's comments about how flawed Hayek's economics are and how great Road to Serfdom is.
So my take on that speech is it's political rather than scientific.
In general I'm skeptical of arguments that something is unknowable unless they come with a rigorous proof or at least a well stated conjecture that has stood the test of time.
This. There shouldn’t be punishments to middlemen who provide a service just come up with a better way. Innovation should happen here not governments enacting laws that effectively kill all the profits a company can make.
I think we don't have to go to cryptocurrencies to see that these punishments are severly needed. Just look at the weekly scandals of "disruptive" new startup banks, people's financials deserve a few governmental protections and if the middlemen are shitty at their job (due to malice or mere incompetence) they deserve a little punishment here or there.
I get that this type of oversight is likely against some philosophical POV here but it's not like middlemen making money is an all-to-great and solitary goal a society should try to defend.
There are rent seeking “middle-men” companies out there just milking patents or their position without providing much if anything of value. I’ll admit that. But I would contend that the credit card processing companies charging 3 to 5 percent are providing a value in the complexity that is payments but whether that warrants 3 to 5 percent I’m not qualified to say just I wanted to make the distraction between the types of middlemen.
Every additional payment method supported by XaaS is one more reason for using 3rd party payment processing, meaning that there will be a fee even on independent cryptocurrency. It’s not a solution.
> It’s not hard, it just requires you have politicians capable of dodging the huge piles of cash MasterCard and Visa throw at them whenever talk of breaking the duopoly hits the table.
Ignoring the difficulty of avoiding lobbying money, yes, it'd be difficult. This is a large scale financial change and there are always, always loopholes that will come, not just from politicians who make those because of lobbying money. With how giant the economies are, and how often these cards are used, it isn't a simple move at all.
Look at credit card chip readers in the US. The amount of backend equipment change it took to get something "that simple" in action was a lot. I'm not defending them for it not being quicker, but a move like a duel card is absolutely difficult.
Look at credit card chip readers in the US. The amount of backend equipment change it took to get something "that simple" in action was a lot.
I'd wager that the banks didn't give a damn as long as fraud was cheaper than investing into a new, much securer system. France was the first country to introduce chips into debit cards and tha was in 1990[1]
Cards are yesterday things. Many countries quickly moving on to phone based payments. Its much secure (requires touch or face ID) than doing fake signatures. I've no idea why visa/mastercard can't move to this. The often given reason for massive 5% cut is potential voided transactions, merchant setup, cashback expected by customers and ofcourse profit. Much of these can be eliminated by phone based transactions. This space is ripe for disruption.
Not sure if matters but at least to my understanding, DanKort is a debit card, so I would expect it to have a flat rate since the cost of transaction is less dependent on the total amount vs a credit card transaction where there is more clearance and risk involved?
At least in some jurisdictions I lived, debit card is as good as cash (well, not exactly the same but because handling cash has also its cost, most of retailers treat them equally)
But that's the point. Monzo is the best bank in the world and yet it's only available in the UK. As soon as you're trying to cross a border it becomes challenging. A cryptocurrency can be a very useful solution here: it skips decenies of progress to set up an interoperable network for banks and custodians to use (and users as well if they want to).
> A cryptocurrency can be a very useful solution here: it skips decenies of progress
The fact that it is a _cryto_ currency is merely anecdotal. Its an implementation detail. It makes people think this currency is actually distributed as most other crypto currencies, while in fact it's just a consortium of companies having total control over all aspects (issuance, destruction, etc.) of the currency.
> set up an interoperable network for banks and custodians to use
This is just plain wrong. It's not banks or custodians that use this currency, it's just end users and the consortium. Banks are heavily controlled and regulated. I _mainly_ trust governments and legal systems to take fair decisions or litigate properly monetary issues. There is nothing like that here. The consortium of companies owning the currency decide the amount they want to create, they decide who gets refund and why, etc. I have much more trust in a country and a judiciary system than a bunch of worldwide companies to handle my currency.
The consortium of companies owning the currency decide the amount they want to create, they decide who gets refund and why
Don't forget the amount of support they will provide. Looking at major tech companies and their histories in providing customer support I see a rather bleak picture here.
This goes also for all those new fangled disruptive app banks. Guess how much success an N26 (new German app bank) customer had to contact support after 80'000 Euro went missing from his account. Spoiler: Until it was a massive story in the press, not much.[1]
I’m putting everything on credit cards. Amex for £ transactions, 0% FX MasterCard for foreign transactions. Another airline reward card when the merchant doesn’t take Amex.
I only ever use debit to pay off the balances of credit cards and to withdraw cash.
> Visa and Mastercard are taking a 3-4% cut of every single consumer payment made in much of the world. That ends up being a very, very big number.
I think you’re overestimating that rate, and by quite a bit. Mastercard’s fees seem to be between 0.2%-1.65%[0] depending on the card and transaction type.
I didn’t bother to look for Visa’s rate, but I’d imagine it’d be similar.
You are correct if you interpret "Visa and Mastercard" as literally Mastercard Incorporated and Visa Inc.
He used "Visa and Mastercard" as a metonymy for the entire payment processing network i.e. payment gateway + issuing bank + acquiring bank + card networks. The total fee for the entire network is indeed 3-4%, and as you rightly pointed out, Mastercard Incorporated and Visa Inc. fees actually only make up for less than half of the total transaction fees.
> If you live in a country that has extremely tight currency and economic controls but with a corrupt government, and are experiencing hyperinflation (Zimbabwe, Venezuela, others https://tradingeconomics.com/country-list/inflation-rate), access to alternative currencies can literally be the difference between life and death for individuals, where the money you make on your salary will be worthless by the time you get your check.
Those same "tight currency and economic controls" apply just as much to cryptocurrencies as they do to Visa gift cards. There's nothing better about "Venezuelans should've used cryptocurrency" versus "Venezuelans should've used dollars".
But beyond that, people have the right to determine their country's monetary policy independent of, say, Bitcoin devs, Facebook executives, or a foreign government (ex: Venezuelans using USD), and it's hard for me to ignore the vague scent of opportunism here. The solution to corrupt governments is not "get rid of all governments", it's "get rid of corrupt governments".
> There's nothing better about "Venezuelans should've used cryptocurrency" versus "Venezuelans should've used dollars".
US has often taken advantage of its dominant world currency position. For example, massive amount of QE that eventually gets absorbed worldwide with little inflation in US. Similarly "petro dollars". The bottom line is that if someone is allowed to print currency at whim, they will.
The true value of any currency is what you can do with it. If someone owns some coin and wants to buy some food to feed their family, the seller of the food first has to accept the coin, but regardless what value the rest of the world places on the coin, the seller of the product is still in control of what they will accept. I am not sure how using a cryptocurrency solves the problem of hyperinflation. It is still not going to be cheap or easy to purchase items in the areas these problems exist. I think your other points about access to banking and storing/transferring money are valid. It implies the person has a working mobile phone and access to a network though too.
"Using a cryptocurrency" doesn't solve the problem of hyperinflation in itself. However, Libra is backed by its reserve ("Libra Reserve") which is a basket of low-volatility assets structured to keep its value relatively stable. If my interpretation is correct, this basket can change over time so that it is always made up of stable currencies.
It's the only cryptocurrency that anyone outside of the crypto world has heard of/takes any interest in/would consider letting you buy their stuff with
Have you tried buying anything with Bitcoin Cash? Currently the transaction fee is under 500 satoshi (about 1/5 of 1 US cent) to have your transaction included in the next block.
Visa and Mastercard are taking a 3-4% cut of every single consumer payment made in much of the world. That ends up being a very, very big number.
There are two assumptions you are making, both of which are false. The first is that handling cash isn't expensive, but it is. You have to store in various secure locations, transport it between those locations, count it multiple times... And that's true even if you're a market trader or a small shop. For those people it could easily be a significant part of their day and a significant risk, all of which goes away with cards (and the fee is nowhere near 3-4%, it's more like 1-2%).
The second is that, in a market that has demonstrated a willingness to accept the transaction fees of the major card providers, that anyone would "leave money on the table". Sure they'll undercut them initially to win market share but once they have it, the price will inexorably creep back up to the level the market will bear.
My assumptions are based in that I’ve worked in the industry. There’s plenty of small restaurants that are cash only, because they operate on the thinnest of margins. Gas stations as well. To the merchant, a fee of 3% + .10c per transaction is very common. More for Amex.
The second point sounds like an economics 101 conclusion. Network effects are real. Regulatory capture is real. Starting a new card network is harder than beating google in ad revenue in search.
not saying it is the case but a lot of restaurants I worked were cash only because their supply chain was very low tech (also cash-only) and they simply didn't pay the taxes.
Gas stations might be higher at least in the USA because the kick back for gas is sometimes higher (e.g.: 1% cash back). Also, gas stations seem to really don't want to handle cash those days.
Being a Danish citizen and holding Krone at least in theory you may vote to control its inflation and claim social benefits from the issuer (Danish State). I mentioned the benefits because often they are financed through money printing by the government.
With libra you won’t have those rights at all. One can argue that they basically get the same 4% as credit cards by depriving you benefits or voting power.
If you're running some kind of IT infrastructure big enough for the whole world to use, you're going to want a cut of each transaction whether you are VISA/MC or Facebook's blockchain. Some sort of transaction fee is inevitable, even (or especially) on a private blockchain.
Visa and Mastercard have invested so I wonder how they might weigh in on the project. Also, the Libra-coin should also have a transaction cost associated but I would expect/presume it stands an order of magnitude lower than 3-4%
Visa/Mastercard consider crypto an existential threat - the value add that they have in terms of consumer protection, middleman conflict resolution, and fraud prevention does not add up to that 2-4% level of value, and they admit that. Trust and the network effect keep them in play for now.
Crypto transactions however, have not lived up to the "hype" of being truly cheap thus far. Visa/MC are positioning themselves such that the value they bring is not something that crypto can provide. We'll see where that ends up - I'd expect Visa/MC stock to move a bit if the transaction fees for Libra end up being sub-$.05.
It isn't clear to me that you wouldn't still have payment processors anyway.
In the UK right now I can send money to your account nearly instantly, and for free. I wouldn't want to purchase anything like that though, I'd want to use some kind of card, why would Libra be any different?
> Visa and Mastercard are taking a 3-4% cut of every single consumer payment made in much of the world. That ends up being a very, very big number.
I'm guessing some of that goes towards chargebacks and other protections in the form of reimbursing purchases from stolen credit cards. It would be tough for me to trust any online replacement without a very firm and reliable appeals system.
Do we have any indication from Facebook that they intend to use Libra to massively undercut Visa / Mastercard for merchant services? I mean in the developed economies.
yes, their whitepaper heavily suggests that access to finance products for the poor is a big motivation behind Libra. However, it does feel a bit like white washing as the majority of the profits from Libra will obviously be the convenience of paying via facebook owned messengers etc.
The problem with Visa and Mastercard in the developing countries I've experienced is the banking system.
In Cambodia, you can only get a credit card from a Cambodian bank if you have a deposit with them that matches your credit limit (i.e. to get a card with a $5K limit, you need to maintain a balance of $5K in your account).
Most people cannot get credit/debit cards because the banks won't issue them, because they don't trust anyone and won't take the risk involved in issuing cards
I can see how Libra will solve a lot of frustrations for Visa/Mastercard working in poorer countries
to be honest, I'm not sure. They issued me one when I asked for it, but I had to ask, it wasn't normal. And often when I use it, I get a Whatsapp call from a nervous bank staff member checking that it was me that used it. Kind of cute really.
I'm fairly anti-crypto, but there are a couple items in favor of #1:
- A currency outside of traditional governments would theoretically be free of currency manipulation by those governments (ex. China and the Yuan)
- An international currency can sidestep the artificial middleman fees and friction caused by traditional monetary exchanges. Ex. my friend who is currently studying in Japan wanted to get some money from her US bank account to Japan to pay for tuition and not only had to wait for banks to be open, but also had to pay exchange and transfer fees.
- This one doesn't necessarily require an independent currency, but crypto also theoretically enables the fabled land of online micro-tipping for content creators, publishers, etc.
> - A currency outside of traditional governments would theoretically be free of currency manipulation by those governments (ex. China and the Yuan)
You can't live your life outside your country's currency though. It has a built-in demand because you have to pay taxes in it. So you're going to have to buy some of it somewhere.
> - An international currency can sidestep the artificial middleman fees and friction caused by traditional monetary exchanges. Ex. my friend who is currently studying in Japan wanted to get some money from her US bank account to Japan to pay for tuition and not only had to wait for banks to be open, but also had to pay exchange and transfer fees.
> > - A currency outside of traditional governments would theoretically be free of currency manipulation by those governments (ex. China and the Yuan)
> You can't live your life outside your country's currency though. It has a built-in demand because you have to pay taxes in it. So you're going to have to buy some of it somewhere.
Yes but then you can shop around for conversion and can keep the majority of your liquidity in a vehicle which is less easily manipulated but just as fungible (I am just arguing about the utility of a global, trans-national currency and not speaking to specifics offered by the Facebook coin specifically).
Currently, if you want to hedge against the Yuan but still want to buy goods in China, you don't have many choices. But if vendors accepted some other currency in addition to Yuan, you can convert to Yuan to settle debts with your government and keep your holdings liquid elsewhere.
TransferWise doesn't work any faster than SWIFT -- if anything it's usually slower. They don't have any magic way to put money into your account on a "bank holiday" either.
> - A currency outside of traditional governments would theoretically be free of currency manipulation by those governments (ex. China and the Yuan)
As long as these three points are true: a) the notion of a stablecoin means stable relative to one selected fiat currency, b) the goods you are selling or purchasing are priced both in your local currency (which may or may not be the stablecoin peg) and the stablecoin, and c) that governments can still manipulate the ordinary currencies, then I don't see how you can be free from government manipulation.
You want to buy a product and the seller will accept the coin. The price/value of the coin is totally going to be determined by the seller and what they will accept for the product they are selling. Perhaps if you are in the US or EU and buying an automobile the price will be fairly stable/predictable but if you are in India or China and wanting to buy something from a local vendor the price/value is what the seller will accept.
being free of Government manipulation while desirable also has drawbacks as a corporate owned currency means it would be subject to corporate manipulation. Think Kong Bucks. Basically, corporate currencies mean not only do you shop at the company store, but you use their money too. I think the original premise of a government less people's coin via bitcoin is a better idea as it means the population takes responsibility for their currency.
No doubt if FB (i refuse to call them libra) coins become popular, when world governments limit crypto currency at FB's request, FB coins will no doubt be the only exception.
> 1. The world could use an online independent currency
Maybe, but "Facebook" and "independent" hardly go together.
> Unlike government issued currencies, any monopoly or control facebook derives isn't done through force
True, but the measure of control average person has over facebook is also close to zero. With government, you at least have courts, elections, Constitution finally... it is usually hard to go against the government, but it is possible and at least the presumption is that the government is there to the benefit and by the consent of the people (it's not very useful for a random citizen but at least that's the principle which can have some useful consequences sometimes). Facebook is there for whoever owns Facebook, and has zero obligations to anybody else. It could completely block you any time it wants to for any reason it wants to, could deny you use of any of its resources with no explanation needed and no recourse possible, it could change its policies any time with zero concern for your interests, etc.
> I just wish there could be a deeper exploration of both the pros and cons.
What are the pros of specifically this Facebook proposition that can not be achieved without Facebook being in the picture?
> It could completely block you any time it wants to for any reason it wants to
As opposed to what banks did in Cyprus in 2013 when they seized the money on the savings account of their own customers and basically stopped people from withdrawing their money from their own bank accounts?
And said customers had no recourse at all against the banks helping themselves to their money?
In theory, the recourse is that the people can exert power over the banks by electing different politicians. Obviously, sometimes that doesn't work as well as we'd like, but there's not even such a possibility of recourse when Facebook fucks you over.
>In theory, the recourse is that the people can exert power over the banks by electing different politicians.
Ah, but there's the rub. When every major political party is beholden to banking interests, "electing different politicians" is an almost-insurmountable task. And even so, is no guarantee that a new set of politicians won't eventually become corrupt and beholden to those interests either.
If "electing different politicians" is an insurmountable task, then developing an alternative, trustless financial system beyond the control of politicians becomes much more feasible by comparison. Hence the motivation behind great-great grandparent's comment about the need for an online independent currency. The context of 2008 and things like the TARP bailouts are very important to understanding the entire thought movement behind cryptocurrency as a whole. Hence, the hidden message encoded on the very first Bitcoin block [0]:
>The Times 03/Jan/2009 Chancellor on brink of second bailout for banks
Agree. A world currency in the hands of a few corporations is arguably worse than any government issued fiat.
It will be more efficient and pervasive in both good and bad ways.
[Edit: spelling]
I can tell you from own experience that Facebook's dark patterns are incredibly frustrating at best, and at worst come off as malicious to the end-user.
For example, I refuse to download the Facebook app. When using the mobile website, it often shows me as having new messages. Clicking the notification then redirects me to download the app. Requesting the desktop site, however, shows no notifications and has no redirect.
How am I supposed to trust a company that puts me through that? Is it a bias when they actually lie to me almost daily?
No, I think you misunderstood the notifications. I did at first. Basically Facebook shows you when someone read your messages. This shows up as a notification in messenger mobile but not in the web version. There are others too but I don’t remember the exact circumstances.
You're just strengthening my point - if I'm misunderstanding something, it's because Facebook has deliberately chosen to make it difficult to understand. That's further reinforced by the fact that they have an incentive to do so - increasing app installs.
Well, perhaps a deep exploration of the pros and cons are warranted, but...
FB has been caught willfully and negligently lying multiple times. (And yes, I'm aware that many banks have done the same.) Nonetheless, why would I choose to trust them over any other payment system?
What's Zuck's testimony to Congress going to be in five years? "We could have done better. We will do better. Who could have forseen this nightmare mess...?"
My impression of what Libra is to FB is equivalent to that Silicon Valley episode where they did an ICO to found their business and get more users at the same time. I don’t believe FB’s altruistic intention for one second.
Sure, but there should be a discussion about the tech and how it may/may not turn out instead of hur-dur FB bad. This is Hacker News after all not Privacy News.
>Unfortunately I think hackernews has a strong anti-facebook bias
And a strong anti-cryptocurrency/blockchain bias. I'd argue that both are for good reasons however, the burden of proof that this is actually something positive for the world is very clearly in the other camp as far as I'm concerned.
> 1. The world could use an online independent currency
Could it? Why? Independent from who? Because watching the disasters and scams that go on in cryptocurrencies because they don’t have any regulatory oversight, doesn’t make me inclined to think an “independent” currency will be any better. Anyways, it’s not even independent, it’s controlled by a conglomerate of tech and finance companies and lorded over by Facebook, it’s about as un-independent as you can get.
> 2. Adding stability to blockchain currencies and having that work on a large scale is a good thing
Because as we all know, adding yet another currency to the mix has functioned to stabilise things previously. Except now this time it’s run by corporations and lacks anything about what made crypto currencies interesting or worthwhile in the first place.
> 3. Unlike government issued currencies, any monopoly or control facebook derives isn't done through force, it's by making a coin better than all the other coins. Other people are still free to make their competing coins.
In theory, yes; in reality, no. Humans are not creatures of perfect rationality that balance up all their options and make informed, ideal decisions at every point. The crypto currency market has been the perfect example of this: huge fluctuations due to hype and pump-and-dump schemes. Coins unequivocally do not succeed on their technical or theoretical merit. Moreover, all things being equal, I think a crypto currency backed by Facebook is something that should be avoided with a 10 foot pole.
There are a lot of possible nuanced conversations but I think that the rejection of FB-coin on principle is the simplest argument and doesn't require much nuance to achieve.
That principle simply being the principle of decentralization which is core to the concept and purpose of block chains. No single or cluster of large companies or governments can create and control a block chain without violating that principle and thus a rejection on principle is justifiable.
We remember Internet.org - a "free Internet" that conveniently left out all of FB's competitors like Google, Amazon etc. Nothing has changed with their tactics.
I kind of agree with your first two points, but fail to see how Facebook's coin could ever be hoped to achieve this. In what fantasy universe will it be independent of Facebook's control? In what world is the inevitable accompanying tracking of all financial information, cross-referenced with a huge social database by a modern surveillance giant a good thing?
> Unlike government issued currencies, any monopoly or control facebook derives isn't done through force, it's by making a coin better than all the other coins.
It may not be done through sheer force, but when people are making their local decisions, they usually do not have a complete perception of the global ramifications of their actions. The end result might therefore still be something very undesirable for ~everyone.
2. In the sense that it'll likely lift other cryptos, sure. Is that actually a good thing?
3. Facebook IS the internet for many consumers in third world countries as their FB access is subsidized and free. I find it hard to believe FB isn't going to similarly force-push Libra.
Hacker News is biased against both Facebook and cryptocurrency, and for good reasons. I hope Libra fails.
I don't have an anti-Facebook bias (ok I do, but it's not relevant in this case), but I do have a strong anti-blockchain-as-a-buzzword bias.
1. If the blockchain & all transactions are not public, how is this different to having a non-blockchain based online currency (e.g. "Facebook credits")?
2. If the currency is pegged to USD, how is this different from just having USD in your PayPal account?
My hunch is, this is just a marketing/regulation-evasion exercise. It's not "currency" (it's crypto-currency) so they're not forced to follow the same AML/KYC/capital control/credit check regulations... Governments will quickly catch up though.
>3. Unlike government issued currencies, any monopoly or control facebook derives isn't done through force, it's by making a coin better than all the other coins. Other people are still free to make their competing coins.
Sure it has. Not with the traditional physical force of armies from the industrial, feudal, agricultural or previous ages; but rather with the psychological force of the information age, executed by armies of programmers and social engineers.
> Is HN really more anti-Facebook than the general population?
Yes, definitely.
> If so, why?
Because the general population cares less about privacy than HN. But I (not OP) think it goes deeper than that, and I've seen people here deliberately spreading lies about FB.
A little while ago I played with the idea that if the masses were convinced that breaking up Facebook (or Google, Amazon, etc) was a good idea and that it eventually happened - the surviving BigTech "shrapnel" would be less capable to stand up against a government seeking information or control over them.
A paranoid and overly Orwellian idea for sure, but interesting to play around with!
I'm not really a proper programmer. I know a little HTML and CSS, but I seem to fit in here better than most places. I have a Certificate in GIS, I run my own websites and I seem to relate to the internet differently than most people who are into Facebook.
The comments I see on HN seem to generally agree with that pattern: It's seems like it's "just not my cup of tea" for a lot of people who are more computer literate than average. On top of that, the privacy issues have become such a big deal of late.
I'd be very surprised if that was so. People move often between the two companies, and in my experience speak of each other quite positively.
More generally, I doubt any employee of a large tech firm has so much loyalty and devotion to their employer that they would take to the internet to undermine a competitor.
1) I'm not saying that's wrong, but I don't think it has the self-evident nature you attribute to it.
2) Agreed, though I'd really like it to be someone other than Facebook that does it.
3) We already have all sorts of other currencies. Frequent flier miles spring to mind, which can often be converted for other use. If they're not popular enough to be universally fungible, then in your terms they're not a "better" currency. It's also not self evident that any coin will do any better.
> 3. Unlike government issued currencies, any monopoly or control facebook derives isn't done through force, it's by making a coin better than all the other coins. Other people are still free to make their competing coins.
But how do you define “better”? Bitcoin has shown you can have non-consensus about very basic things like the ledger and all chaos breaks loose. And what if it’s a large corporation driving non-consensus?
51% attack applies to mining. Libra will not be mined. They have 33% attack on voting... but if 1/3 of the founding companies disagree about some transfer, they've got bigger issues than just that attack.
If there is no mining, how does proof of work occur to create coins? I only have an understanding of how blockchain works, but proof of work seems like a necessary ingredient in any cryptocurrency system.
Again: A ledger that is not decentralized is a bank database, not a cryptocurrency.
As near as I can tell, Zuckbucks are nothing more than the JPMorganCryptocurrency but with a bigger consortium. The only difference seems to be who is given write privileges to the database.
Libra coin is backed by Visa. The whole point of cryptocurrency to avoid having to go through middlemen like Visa or even require banks.
This is a way for the intermediaries to cash in on the cryptocurrency hype and squash it before cryptocurrency payments become mainstream. They want to insert their own thing that looks like a cryptocurrency but will allow them to continue to profit from and control the exchange of money.
It will become a central point of control by providing many governments a convenient one-stop shop for their spying and interference over people's business.
> The whole point of cryptocurrency to avoid having to go through middlemen like Visa or even require banks.
"Whole point" is speaking for a whole lot of people who may not share your views. Certainly circumventing banks was an important founding concept, but circumventing _central_ banks is arguably much closer to the goal.
There's no reason why credit cards shouldn't exist denominated in Bitcoin -- they provide easy access for consumers to obtain unsecured credit. There's no reason why banks (even fractional reserve banks) shouldn't have accounts denominated in Bitcoin -- they provide an easy path for consumers to issue credit.
Opinions may vary on this, but if Bitcoin (or another decentralized cryptocurrency) succeeds the way that people want, I don't see any way to _stop_ these things from happening. People are willing to pay interest on loans; other people want to earn low-risk interest on capital.
The thing that will change is that hopefully without central banks consumers will have to realize that depositing money in banks is not risk-free. And hopefully society will learn this as well and we'll move out of the cronyism/free-money regime that we've been stuck in for the last hundred years or so.
Presumably people wouldn't want a cryptocurrency as plutocratic and centralized as Bitcoin has become. Some lessons were learned with BTC as an experiment, and as we can see there's evolution taking place and plenty of more advanced alternatives are making prior software like bitcoin obsolete.
It's especially troubling how centralized the minting and mining has become. And it's easy to forget there's the problem with energy consumption related to the PoW algorithm eating almost 1% of the entire world's energy simply for an accounting database.
The major reason you don't see payment processors dealing with cryptocurrencies is because the major usecase for most cryptocurrencies like Bitcoin, Monereo, and Ethereum is money laundering.
One important point: if we actually include all 7 billion
people on the earth, most of whom have zero BTC or
Ethereum, the Gini coefficient is essentially 0.99+. And
if we just include all balances, we include many dust
balances which would again put the Gini coefficient at
0.99+. Thus, we need some kind of threshold here. The
imperfect threshold we picked was the Gini coefficient
among accounts with ≥185 BTC per address, and ≥2477 ETH
per address. So this is the distribution of ownership
among the Bitcoin and Ethereum rich with $500k as of July
2017.
In what kind of situation would a thresholded metric like
this be interesting? Perhaps in a scenario similar to the
ongoing IRS Coinbase issue, where the IRS is seeking
information on all holders with balances >$20,000.
Conceptualized in terms of an attack, a high Gini
coefficient would mean that a government would only need
to round up a few large holders in order to acquire a
large percentage of outstanding cryptocurrency — and with
it the ability to tank the price.
With that said, two points. First, while one would not
want a Gini coefficient of exactly 1.0 for BTC or ETH (as
then only one person would have all of the digital
currency, and no one would have an incentive to help boost
the network), in practice it appears that a very high
level of wealth centralization is still compatible with
the operation of a decentralized protocol. Second, as we
show below, we think the Nakamoto coefficient is a better
metric than the Gini coefficient for measuring holder
concentration in particular as it obviates the issue of
arbitrarily choosing a threshold.
...However, the maximum Gini coefficient has one obvious
issue: while a high value tracks with our intuitive notion
of a “more centralized” system, the fact that each Gini
coefficient is restricted to a 0–1 scale means that it
does not directly measure the number of individuals or
entities required to compromise a system.
Specifically, for a given blockchain suppose you have a
subsystem of exchanges with 1000 actors with a Gini
coefficient of 0.8, and another subsystem of 10 miners
with a Gini coefficient of 0.7. It may turn out that
compromising only 3 miners rather than 57 exchanges may be
sufficient to compromise this system, which would mean the
maximum Gini coefficient would have pointed to exchanges
rather than miners as the decentralization bottleneck.
Conversely, if one considers “number of distinct countries
with substantial mining capacity” an essential subsystem,
then the minimum Nakamoto coefficient for Bitcoin would
again be 1, as the compromise of China (in the sense of a
Chinese government crackdown on mining) would result in
>51% of mining being compromised.
- Balaji S. Srinivasan (the CTO of Coinbase)
I'm not defending Bitcoin as the ultimate cryptocurrency; I think it's inarguable that it remains the most empirically successful so far. Whether that's first-mover advantage, network effects, a hardware-capable PoW function, or that it struck closer to the right balance of concerns, who knows?
I don't agree that the energy consumption is a real concern because we don't have a comparison here for what other currencies cost. The cost seems like it should be fairly efficient because there are competing uses for energy.
I'm not sure exactly what the quoted text is trying to say or how it is relevant. I guess towards the notion of "decentralization"? What I would say here is that the reality is that we don't know the gini coefficient of a single thing in the universe except goods that are extraordinarily scarce (like "Mona Lisa paintings"). The estimates for these things for real-world currencies are laughably bad; they are based on self-reported statistics and upsampling, and they rarely reflect the actual scarce good -- effectively M0 of a single currency, which is a number we don't even have for Bitcoin because exchanges represent aggregated possession rather than actual ownership. So my point here is that yes, maybe that Gini coefficient looks bad, but it's the first time that we've even had a moderately realistic look at what a Gini coefficient looks like. Maybe they all look like this -- maybe gold is .99+, maybe Dollars are .99+, maybe Euros are .99+, maybe cigarettes in prison are .99+? Nakomoto coefficient is even more immeasurable for anything but cryptocurrencies, and also disregards aggregated records of deposits.
Bitcoin is not inarguably the most successful cryptocurrency. It has completely failed at its stated aim of facilitating payments, and cannot coordinate the necessary technical changes for that to be realistic. It has also failed as a platform for programmable money, since its programming language is almost impossible to work with, and once again, it has been unable to coordinate the necessary changes to implement a working language.
What is “the most successful cryptocurrency”? I don’t know, but I would vote for one of those that set out as a development platform, and have successfully ignited a huge amount of experimentation on novel financial and organizational instruments (although their value may be unfounded).
This confuses me. I make multiple payments every month in bitcoin to fund various web services (i.e. tarsnap, gandi). In fact, I've never had an issue with a bitcoin payment going through. Ultimately, I find the process of paying with Bitcoin to be a joy. I hold my smartphone's camera up to a QR code on my screen, and BAM - payment complete.
Yes, most other cryptocurrencies provide the same thing. But Bitcoin provided it first.
This confuses me. I have used Bitcoin as a method of purchasing goods and services and it's quite easy, and indeed fun. Buy some BTC or some Koinye or some other space cash and have your funs.
If Libra ends up with 10x more users than all other cryptocurrencies combined, who are you to say what the point is? The existing cryptocurrency space has spent a decade building something that a relatively small number of people are really passionate about but it's the opposite of what the masses want.
In my opinion, the main thing holding back cryptocurrency is scalability. They are working on that. The other thing is just social momentum.
Popularity and merit are two completely different things. It waxes and wanes. The masses will adopt anything that is convenient and popular (regardless of whether its really great or not).
Look at the #1 Billboard song right now. "Old Town Road". This is the most popular song. Its "what the masses want". What's it about? "Can't nobody tell me nothin'" "Cheated on my baby" "Cowboy hat from Gucci".. Its teenage defiance, materialism, and "macho" unfaithfulness. What happens to be popular right now might mean something important, but it also might just be garbage as usual. (By the way, at the moment, it is popular for humans to create literal mountains of actual garbage.)
The people who created cryptocurrency said what the point was. Its to give us control over our digital money and remove the intermediaries.
People who know better should strive to make things that are worthwhile more popular.
That was one example. Look at popular music in general. Or popular movies versus good movies.
Look at the example of social researchers creating a line of actors in downtown Las Vegas. The line went to nowhere. But simply by virtue of having several people in it, it seemed popular. So it grew in popularity to become a very long line. That went nowhere. The thing that was popular had no merit because it did not exist.
Or look at Juicero. Very popular with investors to the tune of $120 million.
I don't really believe that what's popular in music is simply a reflection of what people want. It's more like what someone's marginally accurate model of the public wants. Same with movies. Studios experiment and when they find something that is commercially successful, they make more of it. A lot of good stuff doesn't get made or promoted because they think it wouldn't have the broad appeal to be commercially successful. A lot of what's popular just got that way through promotion, not because of its overwhelming merit.
Scalability is a big problem, but it's not the only problem. Money accomplishes 3 things:
1) Store of value
2) Unit of account
3) Medium of exchange
It's not really very good at any these 3 things. The scalability significantly hurts #3, but even if you fix it it's super volatile, which are bad for 1 and 2. Not only that, but it's inherently deflationary, which is quite bad in the long term, but I guess that's really a secondary concern.
I agree with your point. I think Libra is likely to have more users than Bitcoin not long after it goes live. Libra will be easier to use than a credit card, let alone Bitcoin.
I can't find the citation, but I think Paul Graham said, make it easier to use and cheaper than the incumbents and you'll have a good chance of succeeding.
>The whole point of cryptocurrency to avoid having to go through middlemen like Visa or even require banks.
This is actually a big problem with cryptocurrencies - you're removing middlemen who are legally obligated to enforce anti-money-laundering laws on behalf of governments. In general, cryptocurrencies will either live under existential threat from government law enforcement agencies, or their use cases will be restricted to interactions with centralized AML/KYC-compliant parties that might as well be using a database.
This is why I doubt any major cryptocurrency advances will come from an established company. The risk of noncompliance for them is too great, but to have an effective cryptocurrency you have to build it resistant to outside control. It’s a catch-22 for the companies.
Why does a cryptocurrency have to be resistant to outside control? Because otherwise there’s no reason to use it, since the existing networks run by Visa or the US dollar are more efficient and scalable. The value of bitcoin is in its equalization, no one person on the network’s voice matters more than another.
Yeah, in my book this is more of an attempt by a consortium of powerful companies to get a favorable regulatory regime for money transmitting. "Crypto" is only there to confuse regulators into making an exception.
My first impression when I saw this news was that this would be about as 'decentralised' as Tor is. Facebook (and pals) will always maintain significant enough control over the nodes in the network to both maintain consensus in the blockchain, and also to subvert whatever consumer-friendly guarantees they'll claim to make. No different to Tor and US spy agencies controlling enough exit nodes to defeat the purpose of Tor.
Facebook and privacy are fundamentally opposed, so based on known behaviour the currency itself is most likely a hook into more of its users' lives.
The thing that separates this from a bank database is a small thing, but important, and that's that even the bank cannot reduce your balance in secret without your authorization, since transactions are signed and the ledger is public. That's because of the cryptographic primitives used.
I think in the end we have to accept that taxonomies are going to have rough edges because the map is not the territory. With Bitcoin as the canonical cryptocurrency there have been a number of experiments that have removed or added guarantees. A distributed, verifiable, immutable chain of history is basically git with a couple of extra features, so the lines are necessarily blurry.
Rather than arguing semantics, the main questions are to what degree it is censorship-proof, permissionless, and scarce. The third one is the one that is least clear from the description and whitepaper. It sounds like they're trying to get the first two as well, but the designation of initial stakeholders might make that tricky until they can transition to proof-of-stake.
>the bank cannot reduce your balance in secret without your authorization, since transactions are signed and the ledger is public
This capability is pretty pointless when the bank can indefinitely suspend your ability to make transactions. The ability to block transactions is an essential part of compliance with anti-money-laundering and other banking regulations.
> This capability is pretty pointless when the bank can indefinitely suspend your ability to make transactions.
You beat me to it: Having cryptographically signed transactions simply does not matter when you have to submit the transaction to what Zuck calls a "validator". The validator will just refuse to validate if your address is on a blacklist.
The net effect is that the coins are frozen. And since this is a backed currency, the backing will then be reduced by the amount corresponding to the frozen coins. This has the exact effect of lessening a user's balance.
Naming it "Byzantine Consensus" in their white paper turns out to be surprisingly apropos.
Maybe we need to question whether the government should have the power to unilaterally block a transaction. Just because they’ve been able to in the past doesn’t mean we have to artificially limit technology to let them keep that power.
In the same way they used to be able to tap your phone, but now we can encrypt our calls and make that much more difficult. That doesn’t mean encryption should be illegal.
> Maybe we need to question whether the government should have the power to unilaterally block a transaction. Just because they’ve been able to in the past doesn’t mean we have to artificially limit technology to let them keep that power.
> In the same way they used to be able to tap your phone, but now we can encrypt our calls and make that much more difficult. That doesn’t mean encryption should be illegal.
The government has the power to unilaterally block any transaction in any domain, so long as they deem the transaction to have occurred in or whose parties are under their jurisdiction. I think that, generally speaking, it is rare for the government to cede jurisdiction over a domain once acquired.
> The government has the power to unilaterally block any transaction in any domain, so long as they deem the transaction to have occurred in or whose parties are under their jurisdiction.
The government cannot block cash or barter transactions. Instead, they can declare certain kinds of transaction illegal and then use the courts to punish anyone who engaged in an illegal transaction.
It’s a subtle but important distinction— to do anything against you, the government needs to present some sort of a case to judge and jury, and you have an opportunity to argue your side.
The government can freeze access to your assets unilaterally without your input if they deem it necessary. They can even take your cash and charge it with crimes! That's not even including things like the US government OFAC list which you could end up on without due process.
But to your point, thankfully we (mostly) have due process with our government (in US at least); the same cannot be said of dealing with corporations. I certainly see your point. One large fear I have around money being a number in a database is that your access to the monetary system is more easily revoked, whomever the controlling authority may be.
I think that AML[1] laws were just an example. The point is that the validators have the power to block transactions. This could be due a government request, or because you posted something that Facebook (or one of the other affiliated companies) doesn't like. The actual reason is immaterial; the important thing is that currency is worthless without the ability to spend it.
No, we really don’t need to question that. Financial laws exist for a good reason. Nor should some private company have more power than a sovereign nation just because.
The main reason we do need to ask the question is that Bitcoin is currently effective at preventing governments from blocking Bitcoin transactions. Even if financial laws exist for a good reason, they don't supercede the "natural laws" of cryptography that determine which actions are possible. So the question isn't whether Facebook should have the power to do X. The question is whether Facebook should be allowed to do X, given that Bitcoin is already permitted to do so.
Nope, I feel that my opinion reflects both the conventional wisdom and the expert consensus, which would be a waste of my time to reiterate. It’s the people arguing a multinational corporation ought to be able to circumvent the laws of sovereign democracies that have ‘splainin to do
Isn't AML just a bandage applied on top of a larger issue? What are the use cases for AML? How effective is AML in preventing and or solving for those use cases?
I just mean that your funds at the bank can be seized without your assent for numerous reasons - civil judgements, asset forfeiture, etc., and given to someone else.
The reasons you list are the bank complying with the law. Civil judgements and asset forfeiture are legal matters where the court has decided that your assets are declared forfeit in order to make reparation for some legal matter. Presenting this as proof of your money's insecurity in a traditional banking institution is incredibly disingenuous. The fact that your bank complies with the laws of your country is just more proof of why traditional financial institutions would be more trustworthy than a consortium of tech giants.
What can also happen with banks is that they forbid you from withdrawing more than a certain amount, or take x% from the top of every account because of economic issues.
I've never heard of the latter occurring, can you point me to an example of where this has happened and which countries it has happened in? I can imagine that anything could happen in Zimbabwe, but if this happened in the western world I'd expect widespread outrage.
The former isn't particularly common in modern times. In the US deposits are insured by the FDIC, which has pretty much brought bank runs to a halt. It's happened in Greece recently if I recall, but even then it's still pretty rare.
I don't consider either of these good reasons why an international consortium of tech giants is any more trustworthy than domestic financial institutions that, while greedy and wicked as they may be, are tied up in regulations.
Well Greece is the example I was going to name. It doesn't happen that often, but it's quite possible.
As for the FDIC, there's a similar deal in most countries up to a specific amount(FDIC is $150K, other countries sometimes have less), but I don't think the FDIC has enough money for a more massive bank run.
I agree with you that Facebook & co. aren't that much more trustworthy at all, my comment was aiming more towards pointing out some benefits of things like Bitcoin.
Ultimately you’re still beholden to private corps to transact at all, and transactions will be tied to your id, so I don’t see this having any benefit over bank-sourced transactions at all.
> any benefit over bank-sourced transactions at all
I see a few benefits, but nothing on the order of the full potential of crypto.
1. Your FacebookCoin value is a collection of the world's currency value and not tied to a single goverment currency. It's more likely that {Single Fiat Currency} experiences hyperinflation than {Collection of Fiat Currencies} thus some of your risk is mitigated. Most individuals hold the majority of their wealth in a single currency, or in assets that are sold for a single currency (NYSE transactions are completed in USD, same with US based real-estate.)
2. Transaction fees can potentially be lower than incumbents. This is probably going to be especially true with person-to-person international transfers and could big a huge win for third world startups dealing in digital services.
3. The barrier to entry will, in all likelihood, be significantly lower than traditional banks. I've known people with a credit score so low they couldn't open a bank account. I've meet people with anxiety of using a debt card because of over withdrawal fees.
If it's centralized the bank/consortium can do whatever they want. Your transaction might just disappear if the consortium decides that today is a good day to do so.
Unfortunately the "decentralization is a spectrum" crowd has already furnished the fintech narrative with the arguments necessary to justify calling this "decentralized."
The "decentralization" quality should not be used to describe any system that doesn't exhibit a permanent, irreversible systemic trend towards greater decentralization of all the levers, concentrations and bottlenecks of power within itself over time.
For this to happen, the natural tendency toward concentration of leverage would need to introduce a proportional net cost increase to the system, rather than (as it normally would) be the mechanism by which economies of scale accrue to it.
Bitcoin doesn’t fulfil these criteria either - the devs and miners have not become more decentralised over time, if anything more centralised. Of course it is far more decentralised than this ersatz cryptocurrency from Facebook in both spirit and actions.
However the number of people who want a decentralised currency (with the many, many compromises it requires) is globally very close to 0%, so despite wailing on HN about the true meaning of cryptocurrency, this is not a reason to oppose this Facebook coin.
There are much more pressing ones to oppose it IMO - handing control of your transactions and/or finances to an org as amoral and duplicitous as Facebook, or indeed to any global corporation or cabal thereof, is a very scary idea.
I sincerely hope this dystopian effort to impose a global corporate currency fails.
Mastodon. You can set your own server up and benefit from all othe other existing servers. Mastodon provides a decentralised service running on decentralised infrastructure. You can run your server as you see fit, because access to the wider network is federated.
Zuckbucks provide a centralised service running on decentralised infrastructure. Try add your own server to help run Zuck's blockchain...
Git comes to mind as well, I can go to Bitbucket or Gitlab and upload my repository with its full history in seconds. Or my own self-hosted repository if I wanted.
I don't agree with grandparent for what it's worth, just thought this might work as a reply to your question.
Other than universal entropy, probably nothing. Though math is also decentralized, maybe even moreso, being independent of time. So maybe "nothing that is relevant on a human timescale" is closer.
I strongly suspect that what we have developed a habit of calling decentralization, as if this referred to a final state of a proposed coordination solution, is in fact just a temporary, transitional phase between centralized regimes.
Need to start your system with requirements about asking permissions? Not decentralized.
At some point, we need to recognize that playing games with the system so that Marketing can use the word "decentralized" does not change the meaning of the word.
In other contexts "split up between a group of folks" (that may be open to newcomers or not) is sometimes called "federated", while "everybody has (theoretically) a voice in the outcome" would be "decentralized".
In bitcoin, everybody has a chance to voice their opinion on what the ledger should look like (nevermind how miniscule it is these days given warehouses full of ASIC miners). Libra has 27 designated peers, and somebody in that group gets to decide about number 28 (and, potentially, about the other 26).
And those ASIC miners serve a purpose, it becomes much harder for a state sponsored actor to develop more efficient mining technology to attack the network. And the miners who run the ASICS are the ones with the highest incentive to keep the network running strong.
Libra is a attempt to cut out issuer banks, as in credit cars issuance, out of the equation. That is why Visa/PayPal/Mastercard are on the board. It is less fees for the consumers, definitely better UX, and in a sense relief from the legacy banking woes.
And more importantly for them Visa/Pay Pal/Mastercard aren't outflanked by their own competitors. There's little noble to this endeavor by these characters.
The key here is the ability to exchange it for other coins. If Libra partners can block exchanges, they will use that power as soon as they are requested to by regulators.
I think your point would be better made by not focusing on the terminology.
The way I would define the term "cryptocurrency", Libra Coin would qualify since it uses a blockchain and cryptography. And transactions must be validated by multiple different parties (validators).
Your objection seems to be related to something like openness, i.e. who is allowed to become a validator. In other words, within cryptocurrencies, there are two categories. They could be called, say, open and invite-only.
Libra is invite-only, which you don't think is a good setup. That's the real objection, not that it isn't distributed and not that it isn't a cryptocurrency.
True, but the significant difference is that banks are not allowed to print dollar bills without control(they do print bills effectively but with controls). Similarly they aren’t allowed to just start putting credits on people’s credit cards while keeping a separate database to track real vs their issues credits.
But if that separate database is a distributed blockchain based database suddenly they are allowed to do this...
It is kind of decentralized in the sense that no single company can manipulate the ledger but it's definitely not decentralized in terms of wealth ownership.
Regardless of HN's opinion of Facebook (and regardless of my own for that matter) I predict that this thing will work.
This is only one thing my crystal ball showed me.
Facebook's presence in developing economies is massive. To the point of being synonymous with "The Internet" in a number of places. But they've had a nagging problem. People in these economies consume contents, but do not buy. Even when they have some buying power, access to credit cards is harder to come by. So they're basically seen as online leeches, and you simply fit them in the "expense" category of your media production. Also, due to their buying impotence they're almost immune to advertisement. Over the next few months it's all going to change. Multiple agreements will be signed with various financial institutions and probably more with various telecom in those regions, to allow people to load up their accounts with fbcoins and join the Great Internet Spending Frenzy. Basically turning them overnight into consumers, ripe for the picking.
I foresee big media producing companies in the developed world to be the first to take advantage of this (Disney, Valve, Netflix, YouTube, NYT, various online courses and certifications, etc). Shipping to those regions remains a challenge, so only soft goods for now. IKEA and Walmart will allow fbcoins, but just to be able to sell through their Facebook Store, oh I forgot about those. Anyways.
Next year, Google and Amazon will announce their own stablecoin.
The year after that, Google will announce that they're shutting theirs.