Arquivo da tag: Criptomoedas

Opinion | The Crypto Collapse and the End of Magical Thinking (New York Times)

nytimes.com

Mihir A. Desai – Jan. 16, 2023


Guest Essay

Translucent coins fly toward you amid a colorful backdrop of lines, dots and curlicues.
Credit: Petra Péterffy

At a guest lecture at a military academy when the price of a single Bitcoin neared $60,000, I was asked, as finance professors often are, what I thought about cryptocurrencies. Rather than respond with my usual skepticism, I polled the students. More than half of attendees had traded cryptocurrencies, often financed by loans.

I was stunned. How could this population of young people come to spend time and energy in this way? And these students were hardly alone. The appetite for crypto has been most pronounced among Gen Z and millennials. Those groups became investors in the past 15 years at previously unseen rates and with exceedingly optimistic expectations.

I have come to view cryptocurrencies not simply as exotic assets but as a manifestation of a magical thinking that had come to infect part of the generation who grew up in the aftermath of the Great Recession — and American capitalism, more broadly.

For these purposes, magical thinking is the assumption that favored conditions will continue on forever without regard for history. It is the minimizing of constraints and trade-offs in favor of techno-utopianism and the exclusive emphasis on positive outcomes and novelty. It is the conflation of virtue with commerce.

Where did this ideology come from? An exceptional period of low interest rates and excess liquidity provided the fertile soil for fantastical dreams to flourish. Pervasive consumer-facing technology allowed individuals to believe that the latest platform company or arrogant tech entrepreneur could change everything. Anger after the 2008 global financial crisis created a receptivity to radical economic solutions, and disappointment with traditional politics displaced social ambitions onto the world of commerce. The hothouse of Covid’s peaks turbocharged all these impulses as we sat bored in front of screens, fueled by seemingly free money.

With Bitcoin now trading at around $17,000, and amid declining stock valuations and tech sector layoffs, these ideas have begun to crack. The unwinding of magical thinking will dominate this decade in painful but ultimately restorative ways — and that unwinding will be most painful to the generation conditioned to believe these fantasies.

Cryptocurrency is the most ideal vessel of these impulses. A speculative asset with a tenuous underlying predetermined value provides a blank slate that meaning can be imposed onto. Crypto boosters have promised to replace governments by supplanting traditional currencies. They vowed to reject the traditional banking and financial system through decentralized finance. They said they could reject the purported stranglehold of internet giants on commerce through something called Web 3.0. They insisted we could reject the traditional path toward success of education, savings and investment by getting in early on dogecoin, a meme coin intended as a joke that reached a peak market capitalization of over $80 billion.

These illusory and ridiculous promises share a common anti-establishment sentiment fueled by a technology that most of us never understood. Who needs governments, banks, the traditional internet or homespun wisdom when we can operate above and beyond?

Mainstream financial markets came to manifest these same tendencies, as magical thinking pervaded the wider investor class. During a period of declining and zero interest rates, mistakes and mediocrities were obscured or forgiven, while speculative assets with low probabilities of far-off success inflated in value enormously. Hawkers pitching shiny new vehicles — like “stablecoins” that purportedly transformed speculative assets into stable ones and novel ways of taking companies public without typical regulatory scrutiny — promised greater returns while dismissing greater risks, a hallmark of the ignorance of trade-offs in magical thinking. For an extended period, many investors bought the equivalent of lottery tickets. And many won.

The real economy could not escape infection. Companies flourished by inflating their scope and ambition to feed the desire for magical thinking. WeWork, a mundane business that provided flexible work spaces, was portrayed as a spiritual enterprise that would remake the human condition. Its valuation soared, obscuring the questionable activities of its founders. Facebook and Google reconceived themselves as technological powerhouses, rebranding as Meta and Alphabet, respectively. They sought broad capabilities that they could flex at will in the metaverse or with their “moonshot projects” when, in fact, they are prosaic (if extremely effective) advertising businesses. They are now struggling with many of their fantastical efforts.

Most broadly, many corporations have come to embrace broader social missions in response to the desire of younger investors and employees to use their capital and employment as instruments for social change. Another manifestation of magical thinking is believing that the best hope for progress on our greatest challenges — climate change, racial injustice and economic inequality — are corporations and individual investment and consumption choices, rather than political mobilization and our communities.

I confess that this screed reflects my own experience. For the past decade, being a finance professor meant being asked about crypto or about novel valuation methods for unprofitable companies — and being smiled at (and ignored) when I would counter with traditional instincts. Every business problem, I am told, can be solved in radically new and effective ways by applying artificial intelligence to ever-increasing amounts of data with a dash of design thinking. Many graduates coming of age in this period of financial giddiness and widening corporate ambition have been taught to chase these glittery objects with their human and financial capital instead of investing in sustainable paths — a habit that will be harder to instill at later ages.

Embracing novelty and ambition in the face of huge problems is to be lauded, but the unhinged variety of these admirable traits that we have seen so much of in recent years is counterproductive. The fundamentals of business have not changed merely because of new technologies or low interest rates. The way to prosper is still by solving problems in new ways that sustainably deliver value to employees, capital providers and customers. Over-promising the scope of change created by technology and the possibilities of business and finance to a new generation will lead only to disaffection as these promises falter. All those new investors and crypto owners may nurse a grudge against capitalism, rather than understand the perverse world they were born into.

The end of magical thinking is upon us as cryptocurrencies and valuations are collapsing — and that is good news. Vested interests will resist that trend by continuing to propagate fictions. But rising rates and a return to more routine business cycles will continue to provide the rude awakening that began in 2022.

What comes next? Hopefully, a revitalization of that great American tradition of pragmatism will follow. Speculative assets without any economic function should be worth nothing. Existing institutions, flawed as they are, should be improved upon rather than being displaced. Risk and return are inevitably linked.

Corporations are valuable socially because they solve problems and generate wealth. But they should not be trusted as arbiters of progress and should be balanced by a state that mediates political questions. Trade-offs are everywhere and inescapable. Navigating these trade-offs, rather than ignoring them, is the recipe for a good life.

Mihir A. Desai is a professor at Harvard Business School and Harvard Law School and the author of “How Finance Works and The Wisdom of Finance.”

Moeda poluente: uma transação de bitcoin é o equivalente a jogar dois iPhones no lixo (Yahoo! Finanças)

br.financas.yahoo.com

Redação Finanças – 20 de setembro de 2021


Woman using a smart phone displaying a bitcoin wallet screen.
A vida útil de dispositivos de mineração de bitcoin é limitada a 1,29 anos (Getty Image)
  • Criptomoeda foi apontada como uma das responsáveis pela poluição gerada no mundo digital
  • Tecnologia exigida pelas transações encurta vida útil de aparelhos
  • Em 2020 a rede de bitcoin processou 112,5 milhões de transações

Se engana quem pensa que moedas virtuais não geram lixo. Apesar de não existirem na versão física, as cédulas digitais podem ser tão poluentes quanto objetos que existem no mundo real. Uma única transação de bitcoin gera a mesma quantidade de lixo eletrônico que jogar dois iPhones no lixo, de acordo com uma análise feita por economistas do Banco Central holandês e do MIT.

O problema acontece devido à grande rotatividade de hardware de computador que a criptomoeda incentiva. Os chips de computador especializados são vendidos com o único propósito de executar os algoritmos que protegem a rede bitcoin, um processo chamado mineração, que recompensa aqueles que participam com pagamentos de bitcoin. 

Como apenas os chips mais novos são eficientes minerar de forma lucrativa, os ‘mineradores’ da criptomoeda precisam substituir constantemente seus equipamentos por outros mais novos e mais poderosos.

“A vida útil dos dispositivos de mineração de bitcoin permanece limitada a apenas 1,29 anos”, afirma os pesquisadores Alex de Vries e Christian Stoll em uma entrevista da para a revista Resources, Conservation and Recycling. “Como resultado, estimamos que toda a rede bitcoin atualmente utilize 30,7 quilos métricos de equipamentos por ano. Esse número é comparável à quantidade de pequenos resíduos de equipamentos de TI e telecomunicações produzidos por um país como a Holanda”.

Apenas no ano passado, a rede da criptomoeda processou 112,5 milhões de transações. Em cada uma delas, foi gerado o equivalente a 272g de lixo eletrônico. Essa quantidade de material é o equivalente ao peso de dois iPhone 12 minis.

An elegy for cash: the technology we might never replace (MIT Technology Review)

technologyreview.com

Cash is gradually dying out. Will we ever have a digital alternative that offers the same mix of convenience and freedom?

Mike Orcutt

January 3, 2020


If you’d rather keep all that to yourself, you’re in luck. The person in the store (or on the street corner) may remember your face, but as long as you didn’t reveal any identifying information, there is nothing that links you to the transaction.

This is a feature of physical cash that payment cards and apps do not have: freedom. Called “bearer instruments,” banknotes and coins are presumed to be owned by whoever holds them. We can use them to transact with another person without a third party getting in the way. Companies cannot build advertising profiles or credit ratings out of our data, and governments cannot track our spending or our movements. And while a credit card can be declined and a check mislaid, handing over money works every time, instantly.

We shouldn’t take this freedom for granted. Much of our commerce now happens online. It relies on banks and financial technology companies to serve as middlemen. Transactions are going digital in the physical world, too: electronic payment tools, from debit cards to Apple Pay to Alipay, are increasingly replacing cash. While notes and coins remain popular in many countries, including the US, Japan, and Germany, in others they are nearing obsolescence.

This trend has civil liberties groups worried. Without cash, there is “no chance for the kind of dignity-preserving privacy that undergirds an open society,” writes Jerry Brito, executive director of Coin Center, a policy advocacy group based in Washington, DC. In a recent report, Brito contends that we must “develop and foster electronic cash” that is as private as physical cash and doesn’t require permission to use.

The central question is who will develop and control the electronic payment systems of the future. Most of the existing ones, like Alipay, Zelle, PayPal, Venmo, and Kenya’s M-Pesa, are run by private firms. Afraid of leaving payments solely in their hands, many governments are looking to develop some sort of electronic stand-in for notes and coins. Meanwhile, advocates of stateless, ownerless cryptocurrencies like Bitcoin say they’re the only solution as surveillance-proof as cash—but can they be feasible at large scales?

We tend to take it for granted that new technologies work better than old ones—safer, faster, more accurate, more efficient, more convenient. Purists may extol the virtues of vinyl records, but nobody can dispute that a digital music collection is easier to carry and sounds almost exactly as good. Cash is a paradox—a technology thousands of years old that may just prove impossible to re-create in a more advanced form.

In (government) money we trust?

We call banknotes and coins “cash,” but the term really refers to something more abstract: cash is essentially money that your government owes you. In the old days this was a literal debt. “I promise to pay the bearer on demand the sum of …” still appears on British banknotes, a notional guarantee that the Bank of England will hand over the same value in gold in exchange for your note. Today it represents the more abstract guarantee that you will always be able to use that note to pay for things.

The digits in your bank account, on the other hand, refer to what your bank owes you. When you go to an ATM, you are effectively converting the bank’s promise to pay into a government promise.

Most people would say they trust the government’s promise more, says Gabriel Söderberg, an economist at the Riksbank, the central bank of Sweden. Their bet—correct, in most countries—is that their government is much less likely to go bust.

That’s why it would be a problem if Sweden were to go completely “cashless,” Söderberg says. He and his colleagues fear that if people lose the option to convert their bank money to government money at will and use it to pay for whatever they need, they might start to lose trust in the whole money system. A further worry is that if the private sector is left to dominate digital payments, people who can’t or won’t use these systems could be shut out of the economy.

This is fast becoming more than just a thought experiment in Sweden. Nearly everyone there uses a mobile app called Swish to pay for things. Economists have estimated that retailers in Sweden could completely stop accepting cash by 2023.

Creating an electronic version of Sweden’s sovereign currency—an “e-krona”—could mitigate these problems, Söderberg says. If the central bank were to issue digital money, it would design it to be a public good, not a profit-making product for a corporation. “Easily accessible, simple and user-friendly versions could be developed for those who currently have difficulty with digital technology,” the bank asserted in a November report covering Sweden’s payment landscape.

The Riksbank plans to develop and test an e-krona prototype. It has examined a number of technologies that might underlie it, including cryptocurrency systems like Bitcoin. But the central bank has also called on the Swedish government to lead a broad public inquiry into whether such a system should ever go live. “In the end, this decision is too big for a central bank alone, at least in the Swedish context,” Söderberg says.

The death of financial privacy

China, meanwhile, appears to have made its decision: the digital renminbi is coming. Mu Changchun, head of the People’s Bank of China’s digital currency research institute, said in September that the currency, which the bank has been working on for years, is “close to being out.” In December, a local news report suggested that the PBOC is nearly ready to start tests in the cities of Shenzhen and Suzhou. And the bank has been explicit about its intention to use it to replace banknotes and coins.

Cash is already dying out on its own in China, thanks to Alipay and WeChat Pay, the QR-code-based apps that have become ubiquitous in just a few years. It’s been estimated that mobile payments made up more than 80% of all payments in China in 2018, up from less than 20% in 2013.

Street Musician takes WeChat Pay
AP Images

It’s not clear how much access the government currently has to transaction data from WeChat Pay and Alipay. Once it issues a sovereign digital currency—which officials say will be compatible with those two services—it will likely have access to a lot more. Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington, DC, told the New York Times in October that the system will give the PBOC “extraordinary power and visibility into the financial system, more than any central bank has today.”

We don’t know for sure what technology the PBOC plans to use as the basis for its digital renminbi, but we have at least two revealing clues. First, the bank has been researching blockchain technology since 2014, and the government has called the development of this technology a priority. Second, Mu said in September that China’s system will bear similarities to Libra, the electronic currency Facebook announced last June. Indeed, PBOC officials have implied in public statements that the unveiling of Libra inspired them to accelerate the development of the digital renminbi, which has been in the works for years.

As currently envisioned, Libra will run on a blockchain, a type of accounting ledger that can be maintained by a network of computers instead of a single central authority. However, it will operate very differently from Bitcoin, the original blockchain system.

The computers in Bitcoin’s network use open-source software to automatically verify and record every single transaction. In the process, they generate a permanent public record of the currency’s entire transaction history: the blockchain. As envisioned, Libra’s network will do something similar. But whereas anyone with a computer and an internet connection can participate anonymously in Bitcoin’s network, the “nodes” that make up Libra’s network will be companies that have been vetted and given membership in a nonprofit association.

Unlike Bitcoin, which is notoriously volatile, Libra will be designed to maintain a stable value. To pull this off, the so-called Libra Association will be responsible for maintaining a reserve (pdf) of government-issued currencies (the latest plan is for it to be half US dollars, with the other half composed of British pounds, euros, Japanese yen, and Singapore dollars). This reserve is supposed to serve as backing for the digital units of value.

Both Libra and the digital renminbi, however, face serious questions about privacy. To start with, it’s not clear if people will be able to use them anonymously.

With Bitcoin, although transactions are public, users don’t have to reveal who they really are; each person’s “address” on the public blockchain is just a random string of letters and numbers. But in recent years, law enforcement officials have grown skilled at combining public blockchain data with other clues to unmask people using cryptocurrencies for illicit purposes. Indeed, in a July blog post, Libra project head David Marcus argued that the currency would be a boon for law enforcement, since it would help “move more cash transactions—where a lot of illicit activities happen—to a digital network.”

As for the Chinese digital currency, Mu has said it will feature some level of anonymity. “We know the demand from the general public is to keep anonymity by using paper money and coins … we will give those people who demand it anonymity,” he said at a November conference in Singapore. “But at the same time we will keep the balance between ‘controllable anonymity’ and anti-money-laundering, CTF [counter-terrorist financing], and also tax issues, online gambling, and any electronic criminal activities,” he added. He did not, however, explain how that “balance” would work.

Sweden and China are leading the charge to issue consumer-focused electronic money, but according to John Kiff, an expert on financial stability for the International Monetary Fund, more than 30 countries have explored or are exploring the idea.  In some, the rationale is similar to Sweden’s: dwindling cash and a growing private-sector payments ecosystem. Others are countries where commercial banks have decided not to set up shop. Many see an opportunity to better monitor for illicit transactions. All will have to wrestle with the same thorny privacy issues that Libra and the digital renminbi are raising.

Robleh Ali, a research scientist at MIT’s Digital Currency Initiative, says digital currency systems from central banks may need to be designed so that the government can “consciously blind itself” to the information. Something like that might be technically possible thanks to cutting-edge cryptographic tools like zero-knowledge proofs, which are used in systems like Zcash to shield blockchain transaction information from public view.

However, there’s no evidence that any governments are even thinking about deploying tools like this. And regardless, can any government—even Sweden’s—really be trusted to blind itself?

Cryptocurrency: A workaround for freedom

That’s wishful thinking, says Alex Gladstein, chief strategy officer for the Human Rights Foundation. While you may trust your government or think you’ve got nothing to hide, that might not always remain true. Politics evolves, governments get pushed out by elections or other events, what constitutes a “crime” changes, and civil liberties are not guaranteed. “Financial privacy is not going to be gifted to you by your government, regardless of how ‘free’ they are,” Gladstein says. He’s convinced that it has to come in the form of a stateless, decentralized digital currency like Bitcoin.

In fact, “electronic cash” was what Bitcoin’s still-unknown inventor, the pseudonymous Satoshi Nakamoto, claimed to be trying to create (before disappearing). Eleven years into its life, Nakamoto’s technology still lacks some of the signature features of cash. It is difficult to use, transactions can take more than an hour to process, and the currency’s value can fluctuate wildly. And as already noted, the supposedly anonymous transactions it enables can sometimes be traced.

But in some places people just need something that works, however imperfectly. Take Venezuela. Cash in the crisis-ridden country is scarce, and the Venezuelan bolivar is constantly losing value to hyperinflation. Many Venezuelans seek refuge in US dollars, storing them under the proverbial (and literal) mattress, but that also makes them vulnerable to thieves.

What many people want is access to stable cash in digital form, and there’s no easy way to get that, says Alejandro Machado, cofounder of the Open Money Initiative. Owing to government-imposed capital controls, Venezuelan banks have largely been cut off from foreign banks. And due to restrictions by US financial institutions, digital money services like PayPal and Zelle are inaccessible to most people.  So a small number of tech-savvy Venezuelans have turned to a service called LocalBitcoins.

It’s like Craigslist, except that the only things for sale are bitcoins and bolivars. On Venezuela’s LocalBitcoins site, people advertise varying quantities of currency for sale at varying exchange rates. The site holds the money in escrow until trades are complete, and tracks the sellers’ reputations.

It’s not for the masses, but it’s “very effective” for people who can make it work, says Machado. For instance, he and his colleagues met a young woman who mines Bitcoin and keeps her savings in the currency. She doesn’t have a foreign bank account, so she’s willing to deal with the constant fluctuations in Bitcoin’s price. Using LocalBitcoins, she can cash out into bolivars whenever she needs them—to buy groceries, for example. “Niche power users” like this are “leveraging the best features of Bitcoin, which is to be an asset that is permissionless and that is very easy to trade electronically,” Machado says.

However, this is possible only because there are enough people using LocalBitcoins to create what finance people call “local liquidity,” meaning you can easily find a buyer for your bitcoins or bolivars. Bitcoin is the only cryptocurrency that has achieved this in Venezuela, says Machado, and it’s mostly thanks to LocalBitcoins.

This is a long way from the dream of cryptocurrency as a widely used substitute for stable, government-issued money. Most Venezuelans can’t use Bitcoin, and few merchants there even know what it is, much less how to accept it.

Still, it’s a glimpse of what a cryptocurrency can offer—a functional financial system that anyone can join and that offers the kind of freedom cash provides in most other places.

Decentralize this

Could something like Bitcoin ever be as easy to use and reliable as today’s cash is for everyone else? The answer is philosophical as well as technical.

To begin with, what does it even mean for something to be like Bitcoin? Central banks and corporations will adapt certain aspects of Bitcoin and apply them to their own ends. Will those be cryptocurrencies? Not according to purists, who say that though Libra or some future central bank-issued digital currency may run on blockchain technology, they won’t be cryptocurrencies because they will be under centralized control.

True cryptocurrencies are “decentralized”—they have no one entity in charge and no single points of failure, no weak spots that an adversary (including a government) could attack. With no middleman like a bank attesting that a transaction took place, each transaction has to be validated by the nodes in a cryptocurrency’s network, which can number many thousands. But this requires an immense expenditure of computing power, and it’s the reason Bitcoin transactions can take more than an hour to settle.

A currency like Libra wouldn’t have this problem, because only a few authorized entities would be able to operate nodes. The trade-off is that its users wouldn’t be able to trust those entities to guarantee their privacy, any more than they can trust a bank, a government, or Facebook.

Is it technically possible to achieve Bitcoin’s level of decentralization and the speed, scale, privacy, and ease of use that we’ve come to expect from traditional payment methods? That’s a problem many talented researchers are still trying to crack. But some would argue that shouldn’t necessarily be the goal.  

In a recent essay, Jill Carlson, cofounder of the Open Money Initiative, argued that perhaps decentralized cryptocurrency systems were “never supposed to go mainstream.” Rather, they were created explicitly for “censored transactions,” from paying for drugs or sex to supporting political dissidents or getting money out of countries with restrictive currency controls. Their slowness is inherent, not a design flaw; they “forsake scale, speed, and cost in favor of one key feature: censorship resistance.” A world in which they went mainstream would be “a very scary place indeed,” she wrote.

In summary, we have three avenues for the future of digital money, none of which offers the same mix of freedom and ease of use that characterizes cash. Private companies have an obvious incentive to monetize our data and pursue profits over public interest. Digital government money may still be used to track us, even by well-intentioned governments, and for less benign ones it’s a fantastic tool for surveillance. And cryptocurrency can prove useful when freedoms are at risk, but it likely won’t work at scale anytime soon, if ever.

How big a problem is this? That depends on where you live, how much you trust your government and your fellow citizens, and why you wish to use cash. And if you’d rather keep that to yourself, you’re in luck. For now.