The crypto thread

What do you prefer?

  • Bitcoin

    Votes: 3 9.7%
  • Ethereum

    Votes: 6 19.4%
  • Binance Coin

    Votes: 0 0.0%
  • Cardano

    Votes: 1 3.2%
  • Fiat

    Votes: 6 19.4%
  • Go away, I deal in coke and gold bars

    Votes: 14 45.2%
  • Privacy coins

    Votes: 1 3.2%

  • Total voters
    31
  • Poll closed .
So, um, some of you keep mentioning ETFs, & how they affect the market, & how Blackrock is getting the go ahead, & how there might be a green light...

I mean I, like, totally know what an ETF is of course, but could y'all explain it to, um, other people, in case they are curious? :mischief:
 
So, um, some of you keep mentioning ETFs, & how they affect the market, & how Blackrock is getting the go ahead, & how there might be a green light...

I mean I, like, totally know what an ETF is of course, but could y'all explain it to, um, other people, in case they are curious? :mischief:
An exchange-traded fund (ETF) is a company that buys, sells and holds "stuff" and is traded on the stock market. The idea is that it has the same risk profile as the "stuff" but is traded like a stock.

For many things, like "generic tech stock" or "government debt" you can see how the trust required in a third party and the fees could be worth the convenience of not having to do the detailed transactions yourself.

I just do not understand how one could believe both that bitcoin is a valuable tool for commerce in the future and that it is so difficult that an sophisticated economic actor has to delegate their trust to a third party to buy, sell and hold it.
 
IBM releases first-ever 1,000-qubit quantum chip

IBM has unveiled the first quantum computer with more than 1,000 qubits — the equivalent of the digital bits in an ordinary computer. But the company says it will now shift gears and focus on making its machines more error-resistant rather than larger.

For years, IBM has been following a quantum-computing road map that roughly doubled the number of qubits every year. The chip unveiled on 4 December, called Condor, has 1,121 superconducting qubits arranged in a honeycomb pattern. It follows on from its other record-setting, bird-named machines, including a 127-qubit chip in 2021 and a 433-qubit one last year.

Quantum computers promise to perform certain computations that are beyond the reach of classical computers. They will do so by exploiting uniquely quantum phenomena such as entanglement and superposition, which allow multiple qubits to exist in multiple collective states at once.

But these quantum states are also notoriously fickle, and prone to error. Physicists have tried to get around this by coaxing several physical qubits — each encoded in a superconducting circuit, say, or an individual ion — to work together to represent one qubit of information, or ‘logical qubit’.

As part of its new tack, the company also unveiled a chip called Heron that has 133 qubits, but with a record-low error rate, three times lower than that of its previous quantum processor.

Researchers have generally said that state-of-the-art error-correction techniques will require more than 1,000 physical qubits for each logical qubit. A machine that can do useful computations would then need to have millions of physical qubits.

But in recent months, physicists have grown excited about an alternative error-correction scheme called quantum low-density parity check (qLDPC). It promises to cut that number by a factor of 10 or more, according to a preprint by IBM researchers1. The company says it will now focus on building chips designed to hold a few qLDPC-corrected qubits in just 400 or so physical qubits, and then networking those chips together.

The IBM preprint is “excellent theoretical work”, says Mikhail Lukin, a physicist at Harvard University in Cambridge, Massachusetts. “That being said, implementing this approach with superconducting qubits seem to be extremely challenging and it will likely take years before even a proof-of-concept experiment can be tried in this platform,” Lukin says. Lukin and his collaborators conducted similar study on the prospect to implement qLDPC using individual atoms instead of superconducting loops2.

The catch is that the qLDPC technique requires each qubit to be directly connected to at least six others. In typical superconducting chips, each qubit is connected only to two or three neighbours. But Oliver Dial, a condensed-matter physicist and chief technology officer of IBM Quantum, at IBM’s Thomas J. Watson Research Center in Yorktown Heights, New York, says that the company has a plan: it will add a layer to the design of its quantum chips, to allow the extra connections required by the qLDPC scheme.

A new IBM road map on the its quantum research unveiled today sees it reaching useful computations — such as simulating the workings of catalyst molecules — by decade’s end. “It’s always been the dream, and it’s always been a distant dream,” says Dial. “Actually having it come close enough that we can see the path from where we are today for me is enormous.”

 
IIRC quantum computing is supposed to be able to crack encryption
which would be a helpful stake to the heart of the crypto industry.
 
IIRC quantum computing is supposed to be able to crack encryption
which would be a helpful stake to the heart of the crypto industry.
That is why I post such news here.
Spoiler Youtube on how they do it :
 
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I just do not understand how one could believe both that bitcoin is a valuable tool for commerce in the future and that it is so difficult that an sophisticated economic actor has to delegate their trust to a third party to buy, sell and hold it.

Much like communism. Valuable idea, but so difficult when it comes to practical application. Communist aims to get rid of money, but trades with much of the world, because he accepts the world is not ready for immediate ideological and material transformation. There is no contradiction here, in my mind.. Just an honest acknowledgement of imperfections, while working, gradually, to resolve them. Is the world ready for immediate decentralisation? I don't think so. Technological hurdles, educational ones, etc. So! In the meantime it seems natural to delegate part of the business to trader Vic, who, at least, makes sure there is exposure where it matters.

IIRC quantum computing is supposed to be able to crack encryption
which would be a helpful stake to the heart of the crypto industry.

Quantum computing is expected to strengthen encryption equally. Not just decryption.
 
Much like communism. Valuable idea, but so difficult when it comes to practical application. Communist aims to get rid of money, but trades with much of the world, because he accepts the world is not ready for immediate ideological and material transformation. There is no contradiction here, in my mind.. Just an honest acknowledgement of imperfections, while working, gradually, to resolve them. Is the world ready for immediate decentralisation? I don't think so. Technological hurdles, educational ones, etc. So! In the meantime it seems natural to delegate part of the business to trader Vic, who, at least, makes sure there is exposure where it matters.
For the communist nations they had the choice to trade with capitalists or not have those products. The choice here is between buying bitcoin and having to manage your own wallet or trusting and paying a third party. If trusting and paying for a third party is easier for a sophisticated investor like everyone thinks themselves then who is going to be using it in the future such that the price will go up?
Quantum computing is expected to strengthen encryption equally. Not just decryption.
You do not need quantum computers to make quantum safe encryption. We just need to write and use the software with the better algorithms.
 
For the communist nations they had the choice to trade with capitalists or not have those products. The choice here is between buying bitcoin and having to manage your own wallet or trusting and paying a third party. If trusting and paying for a third party is easier for a sophisticated investor like everyone thinks themselves then who is going to be using it in the future such that the price will go up?

Radioactive monkeys roaming the post-apocalyptic wilderness!

But seriously, today, for most people, it is definitely simpler and safer to just use exchanges, cloud wallets. In that regard there wasn't much change since the times this thread was created, wouldn't you say? I think you mentioned recently how some amount of money abandoned exchanges and went to private storage in reaction to government crackdown. But I am unaware of the ratio of private storage vs exchange storage and their dynamics over a decade in relation to institutional/retail participants. As technological wave propagates, better solutions will be proposed, striking better balance between decentralisation, safety and ease of use.

The biggest worries of professional money managers are: taxation and safety. They need extra layer of security provided by exchanges, or an extra layer by ETF provider so that someone takes on part of their risk of managing other's money. Preferably both layers. And then some.

"Sophisticated investor" is a kind of a mythical creature. Some professional investors use ETF's to get exposure to technology sector, which boggles my mind for quite a while. You would think that if they are professional, they are better off picking individual technological stocks. But no, this isn't how it works for them. Their worry is how to loan another billion and quickly dump them into some ETF, not which companies, stock market constituents, are inherently more valuable compared to a common denominator. Different MO.

Anyway, you asked a very serious question, I won't pretend I have an answer, or if there even is an answer. Just shooting ideas up in the air.
 
Another interesting element of the picture is the cost of borrowing. It has been a year and a half, since US Federal Reserve started increasing the cost of borrowing money "Fed funds rate". Today, major banks can borrow from the FED at 5.25-5.5% rate.


For a very long time, for nearly twenty years, since the burst of the dot-com bubble, and with the exception of few years leading to 2009 crash, the cost of borrowing money was hovering slightly above 0%. Borrowing was dirt cheap for banks, and for consumers. Banks were borrowing to buy stocks and to invest in all sorts of dubious projects worldwide. Well, this era was unsustainable and has ended in 2022, when FED gradually, but mercilessly raised the funds rate to the current level.

As money were cheap, inflation was well above target rates (2.5%) and the value of money worldwide gradually declined. At different rates: Turkish Lira, Argentinian Peso lost value way faster, but so did the Dollar, yet, at a more conservative rate.

That was great environment tfor crypto to thrive, as crypto, unlike traditional fiat currencies, was not tied to an ever increasing body of printed debt. In 2021-2022 the screws were tightened, cost of borrowing rose, and that was generally unfavourable environment for both the economy (hard to expand, when credit is expensive) and crypto (it's allure as inflation hedge was dampened, as inflation was slowing)

Today, we are rapidly approaching the point where the reverse process is bound to happen again. The diaphragm of borrowing cost is going to contract, again. The FED is going to, by its own admission, gradually lower the cost of money over the course of 2024/2025. They plan such things, and you can, if you're interested, look up on their website, the rate at which they plan to cheapen credit. By their own admission, this plan is speculative, because no one really knows what's going to happen tomorrow. Yet it helps to have a plan.

So, economy is going to expand, with cheaper money flowing in, and so will inflation, again.

Spoiler funds rate history :
Screenshot 2023-12-08 at 21.42.53.png


Rising inflation is going to become once again a tailwind for crypto, as it's deflationary nature (an ever contracting pool of currency) will prevent it from losing value along with peers, such as Dollar, Yen and others
 
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safer to just use exchanges
This we could start to do the maths on. How much of the "money in exchanges" has been lost in the last year? Exactly what you call an exchange, but FTX lost about $10 bn. I cannot easily find how much is held in exchanges, but that must be a pretty bad lose rate. I guess there is a point that the blackrock ETF is probably somewhat more trustworthy than SBF, but only a bit.
 
Glassnode does that sort of analysis. The chart below captures BTC held in exchanges dynamic since 2018.

78% of the mass of BTC is held outside exchanges. Given that the biggest investors within that mass are institutional, we can safely say that many institutional crypto investors very much share your perspective, Samson.


Links to glassnode in the article above.

btc.png
 
$568 bn was the market capitalisation of BTC in July 2023.

$68 bn held in exchanges.

$238 bn was the market cap of ETH in July 2023.

$28.6 bn held on exchanges

$120 bn was the market cap of all stable coins in July 2023

$14.4 bn held on exchanges

So, total, $111 bn in crypto value held in exchanges as of July 2023.

Lets add 20% to it to account for all other crypto at the same 12% rate mentioned above.

Grand total: $133 bn, as of July 2023.

Extracted the data from STATISTA and applied 12% exchange balance rate from my previous message. Now the data is slightly imprecise in the way that, for example, 14.85% of ETH is held on exchanges, while 12% of BTC is held on exchanges. If you want to make a more precise and more up to date assessment, you can use this resource:


From that it's easier to infer how much of a dent SBF made in the grand total held on exchanges at the time.
 
$568 bn was the market capitalisation of BTC in July 2023.

$68 bn held in exchanges.

$238 bn was the market cap of ETH in July 2023.

$28.6 bn held on exchanges

$120 bn was the market cap of all stable coins in July 2023

$14.4 bn held on exchanges

So, total, $111 bn in crypto value held in exchanges as of July 2023.

Lets add 20% to it to account for all other crypto at the same 12% rate mentioned above.

Grand total: $133 bn, as of July 2023.

Extracted the data from STATISTA and applied 12% exchange balance rate from my previous message. Now the data is slightly imprecise in the way that, for example, 14.85% of ETH is held on exchanges, while 12% of BTC is held on exchanges. If you want to make a more precise and more up to date assessment, you can use this resource:


From that it's easier to infer how much of a dent SBF made in the grand total held on exchanges at the time.
So FTX lost ~7.5% of all crypto held in exchanges. A quick google says "Estimates suggest that around 6 million BTC, or 30% of Bitcoin's supply, have been irretrievably lost", and that is over 14 years so you could put the lose rate of self hosting at at 2.1%/year. It depends how you do your maths, but it does not seem a given that exchanges are more secure than self hosted wallets.
 
There is a question of balancing risk and opportunity. Exchanges offer easy staking, access to thousands newly minted tokens, airdrops, nice interface, nice multi-tiered security levels rivalling and overshadowing most of modern banks. Which attracts speculators and opportunists alike. Accessibility is the positive side of centralisation. So, one logical thing to do, from the point of view an investor, is to keep most coins stashed in safe place, while having a small percentage of total residing on an exchange to be able to capture opportunity when it arises. And have a mechanism to legally cash out, when situation demands.

Then again, how safe is your stashed crypto? I'd argue it's not as safe as you think. Cold wallet can be stolen, can die, malfunction, etc. Most of that particular worry is removed in a centralised place. Then again, I haven't looked into cold storage in more than two years, so things might have changed.
 
Then again, how safe is your stashed crypto?
I do not stash crypto, I only ever have a little "change" for any extended period of time. The wallet on a tails USB stick and seed on a piece of paper hidden in the home is pretty darn good. If I had anything significant I would use secret sharing around my family with the seed.
 
Yes, I understand, I meant you in a general sense.

What happens when uncle Leopold gets drunk and forgets his sharing key? Or becomes cagey? Or both? Anyway, it's a good type of smart contract with many possible applications. I read about similar schemes used by founders of crypto networks. IIRC Zcash made something like that. But they each burned their key before the start of the journey, to make sure no one can capture the network solo. They even had a ceremony for that. But maybe they just appeared to have burned their keys? Nobody knows.

So what happens when USB stick dies, or gets lost or stolen with a 100k on it? It's over. I mean.. my USB sticks die ALL THE TIME. That's why we have banks.
 
What happens when uncle Leopold gets drunk and forgets his sharing key? Or becomes cagey? Or both?
It is n of m sharing. So as long as no more than n collude to take you money and no more than (m - n) of them losses their key you are OK.
Anyway, it's a good type of smart contract with many possible applications. I read about similar schemes used by founders of crypto networks. IIRC Zcash made something like that. But they each burned their key before the start of the journey, to make sure no one can capture the network solo. They even had a ceremony for that. But maybe they just appeared to have burned their keys? Nobody knows.
There are multisig wallets, that are core to most of the important things AIUI. What I am talking about is ssss (or other similar tools), that allow the generation of shared secrets for up top 128 bytes of data. It is a simple command line program. It is not particular to cryptocurrency, and I do not know if it is quantum safe.
Spoiler What it looks like :

Bash:
% ssss-split -t 3 -n 5
Generating shares using a (3,5) scheme with dynamic security level.
Enter the secret, at most 128 ASCII characters: my secret root password
Using a 184 bit security level.
1-1c41ef496eccfbeba439714085df8437236298da8dd824
2-fbc74a03a50e14ab406c225afb5f45c40ae11976d2b665
3-fa1c3a9c6df8af0779c36de6c33f6e36e989d0e0b91309
4-468de7d6eb36674c9cf008c8e8fc8c566537ad6301eb9e
5-4756974923c0dce0a55f4774d09ca7a4865f64f56a4ee0

% ssss-combine -t 3
Enter 3 shares separated by newlines:
Share [1/3]: 3-fa1c3a9c6df8af0779c36de6c33f6e36e989d0e0b91309
Share [2/3]: 5-4756974923c0dce0a55f4774d09ca7a4865f64f56a4ee0
Share [3/3]: 2-fbc74a03a50e14ab406c225afb5f45c40ae11976d2b665
Resulting secret: my secret root password

So what happens when USB stick dies, or gets lost or stolen with a 100k on it? It's over. I mean.. my USB sticks die ALL THE TIME. That's why we have banks.
That is what the "piece of paper hidden in the home" is for. And it does not count unless you have tested it, so I have two. Both would need to fail before I NEED to use the paper, but of course when one fails I will create another. This increases the risk of someone getting one and brute forcing it, but I think that should be really low.
 
There are multisig wallets, that are core to most of the important things AIUI. What I am talking about is ssss (or other similar tools), that allow the generation of shared secrets for up top 128 bytes of data. It is a simple command line program. It is not particular to cryptocurrency, and I do not know if it is quantum safe.

It has information-theoretical security and thus is quantum safe. Without enough shares, the information is not there instead of being there but just very hard to calculate.
 
Big news in crypto vault: 11 crypto ETF's have been approved for trade today by the US SEC (The Securities and Exchanges Commission). Amusingly, just before SEC made official decision to approve, someone hacked the official X.com account of SEC through the mobile phone of a responsible person and released the news of approval prematurely. SEC had to deny approval, only to release proper approval few hours after the incident. Despite that Italian comedy bit, some of the biggest names in the world of finance (BlackRock, ARK Invest) received SEC blessing to offload their crypto stashes into the pockets of their clients as soon as 24 hours after the approval.

Ethereum rocketed 10% in a day, in anticipation. Bitcoin advanced too.

 
Big news in crypto vault: 11 crypto ETF's have been approved for trade today by the US SEC (The Securities and Exchanges Commission). Amusingly, just before SEC made official decision to approve, someone hacked the official X.com account of SEC through the mobile phone of a responsible person and released the news of approval prematurely. SEC had to deny approval, only to release proper approval few hours after the incident. Despite that Italian comedy bit, some of the biggest names in the world of finance (BlackRock, ARK Invest) received SEC blessing to offload their crypto stashes into the pockets of their clients as soon as 24 hours after the approval.

Ethereum rocketed 10% in a day, in anticipation. Bitcoin advanced too.

But what about the concern that this will impede mining?
 
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