If fake money disappears is it really a crime?
So guys, given that I’ll never touch crypto or NFTs with my forty-foot pole, do they present any danger to me as a non-participating citizen?
I mean, if they really caught on and a certain percentage of people invested in the bubble, could they collapse the economy or something — like when Albanians lost all their money to a traditional Ponzi scheme 20 years ago or whenever that was?
It’s getting close to the point of posing systemic risk, but I don’t think it’s at that point yet. We’ve seen crashes that would be huge in pretty much any other market with no real ripple effect in the wider economy or market. That said, if Tether were to properly blow up, things could get spicy.
At the moment, though, the main risk they pose to no -coiners is facilitating crime.
The official report is even better: Community Alert: Ronin Validators Compromised
There has been a security breach on the Ronin Network. Earlier today, we discovered that on March 23rd, Sky Mavis’s Ronin validator nodes and Axie DAO validator nodes were compromised resulting in 173,600 Ethereum and 25.5M USDC drained from the Ronin bridge in two transactions (1 and 2). The attacker used hacked private keys in order to forge fake withdrawals. We discovered the attack this morning after a report from a user being unable to withdraw 5k ETH from the bridge.
They have $650M worth of crypto sitting in an account with zero alerting systems in place. Oh oh oh and they were notified 6 days after the hack happened.
Edit: The more I read the more hilarious it is.
The hacker only had to hack 4 servers to gain access. Once they hacked 4 servers they were able to use built in functionality to get the 5th server to sign their request, thus giving them 5 out of 9 servers giving the OK for the withdrawl.
How do you define it as close to being a systemic risk? I don’t perceive it as anywhere close to that. A terrible risk for some individuals - but our entire financial system? Not really…
wavey
2683
I worry that the environmental impact of them poses a danger to everyone, accelerating climate change.
Almost as if wasting huge amounts of energy just to give some rich pricks a financial product to speculate on wasn’t the best idea we’ve had as a species.
antlers
2684
Once big banks start to make markets and arbitrage, it becomes a systemic risk. Goldman Sachs just started this and others are following ( which is giving BTC prices a nice goose right now).
JonRowe
2685
Yes.
It is quite possible you will be forced to participate in it in the future.
As of right now, probably not. The volatility is well known, so no big banks or smart funds are putting safe money there. Crashes and dips are only going to effect those who have bought in 100%.
That being said, stability could be more present in the future, and there could be a time when blockchain is forced on us.
Which would suck, as it is different than the current system, but not really better.
Posing a systemic risk doesn’t mean it will bring down the entire financial system, just that it has the potential to cause solvency issues for arbitrary financial institutions, not just those with large direct exposure, and/or a liquidity squeeze, and/or it may prompt government intervention in some countries.
Like I say, it’s definitely not there yet, but I think it could get there given time and potentially given certain policy paths (eg adoption of CBDCs, which then get tainted by problems in other crypto). It is already at the point where relatively large numbers of retail customers have “invested” more than they probably should in highly volatile assets that are strongly correlated with other highly volatile assets. Generally speaking governments step in when large numbers of retail investors lose their shirts, even if it’s something really stupid, like Italian banks flogging diamonds to their customers.
The strongest argument against it ever becoming a systemic risk, and I think it’s a fairly powerful one, is that generally it isn’t the stuff that’s perceived as risky that causes financial crises. It’s the stuff that’s perceived as safe, but turns out to be risky, or at least riskier than people thought. It’s all the leverage that gets piled up on the “safe” stuff that causes problems when it has to be unwound in a hurry. It’s hard to see people perceiving crypto as safe any time soon. On the other hand, plenty of institutions seem willing to provide what seem to me to be insane amounts of leverage on it, so who knows.
Meh. I certainly don’t perceive it as a systemic risk. Which does imply the risk of collapse of an entire financial system or entire market.
Now I want Ryan to do a Pitch Meeting for cryptocurrency. I can just see Exec Guy with the “Wowowowowow. Wow.”
aeneas
2689
I like this bit from the article:
Timex
2692
We haven’t even mentioned the most eyebrow-raising aspect of Axie Infinity yet. There are also transaction fees attached to many of the game’s earning and cashing-out mechanisms, and players must also pay a couple hundred dollars to even get in the door. As friend of the program Ed Zitron has keenly observed, “‘Play-to-earn’ is a complete lie—it’s pay-to-play-to-earn.” A system where users must buy in to be able to make money and must also pay transaction fees to a central authority to convert something literally called Smooth Love Potions into dollars or Euros or pesos by selling them to other players, who then hope to make money selling them to to other players, is not a decentralized money-making space.
Dude, who falls for this garbage?
antlers
2694
The biggest play-to-earn is Axle Infinity, which for a while was transferring wealth from venture capitalists to “Team Sponsors” who would pay the hefty entry costs for players in return for half the proceeds; the actual players could make a decent living in the Philippines for a while. Since it was essentially a Ponzi scheme, it has had a drop in the value of the in-game currency and so the number of players. It was recently hacked (as linked above) for $625 million; wouldn’t be surprised if the hack was from insiders looking to cash out before the whole tent folds up.
rei
2696
Spoiler: it’s because he’s already rich and is at the top of the pyramid
ShivaX
2697
Subprime mortgages weren’t a systemic risk until they were.
It’s just a matter of Wall Street creating arcane instruments and then everyone hopping on the “Free Money” train.
Tim_N
2698
For a risk in this context to be systemic then a crypto crash would need to take down major banks. Crypto sites crow on and on about ‘institutional investors’ but I have not seen any data regarding how much crypto exposure is on the balance sheets of major banks and funds. Not saying this data doesn’t exist, just that I haven’t seen any and googling a short time hasn’t helped.
Anyone know?
EDIT: Here is an interesting link, might serve as a list of banks to avoid in future -
