Many of these APYs are being measured in the token staked, not in the "value" of that token as might be expressed in (say) dollars. The payment is then made via inflation, which devalues everyone's tokens to give the people who staled more token. (Yes: this means that the value of your money might go down even if you legitimately have 20% more of it; the market for the token at that point is a separate--yet related--issue.)
Ultrasound money cannot be money with a monetary policy on moving sands that can change because Vitalik and his buddies decided it was a fun experiment.
Ethereum has demonstrated that its monetary policy wasn't "sound" and that it could be changed way too easily with EIP-1559, and will change again.
This meme went so far that people now think it's more than just a stupid meme.
> All those changes took years to make happen and hundreds of people debated them.
Sure. But if you want a money system whose policy is based on, well, politics, we already have plenty of very good implementations of those.
> All of them have made Ethereum more secure, easier to use, and deflationary.
It's too young to say if it's actually deflationary or not. I'm betting on not, because once there is more value leaving the crypto ecosystem than entering it, no force on Earth can stop that from lowering crypto values.
It's deflationary not in a USD sense but that over time there is less and less ETH because it's being burnt. While almost every other token is printing more.
It's not politics, it's discussing technical and economic tradeoffs to make the most secure credible neutral decentralized ledger possible.
There are some Bitcoin maximalists that think Satoshi was a god who figured everything out perfectly from inception. To me their insistance on never changing seems more religious than technical.
Arguing that an inflationary money is actually a better store of value than a deflationary one is not possible from an economic standpoint so they have to switch to other arguments like "well yea the devs continually made the economics better... But what if they make them worse!" Which isn't based in reality, it's all FUD.
There are no further plans to change the economics beyond this point and attempting to change them requires convincing thousands of people that it's a good idea, and it's not a 50% quorum, it's 90%+ because there are many clients written by many different teams that would all have to implement the change.
> There are some Bitcoin maximalists that think Satoshi was a god who figured everything out perfectly from inception. To me their insistance on never changing seems more religious than technical
It's not about getting it perfect. It's about getting it good enough and stable.
Bitcoin had its forks that introduced change. People voted with their legs and chose the stability. What matters is that some developers attempted a change and ultimately people decided they prefer original set of rules.
Not sure what happened with ETH but I feel like it might work a bit differently there.
I can see merit to that, as it's trying to be a good money more than Ethereum, and nation states won't adopt a currency with technical risk.
I just think it ossified way too early and then to justify that they come up with religious arguments that "actually 21m coins on a diminishing curve is the perfect economic policy and any meddling is bad"
Sure, but it ossified at the behest of its community who could have chosen more progressive forks but decided not to. Given how well bitcoin is doing it wasn't a bad call. And if someone doesn't like what bitcoin is (not) doing there's plenty of other cryptos they can move to. So far no crypto seemes to be able to win the holy grail for mass business adoption and it's really hard to tell which one can manage that if any
> It's deflationary not in a USD sense but that over time there is less and less ETH because it's being burnt.
This isn't what the word deflation actually means though. Deflation is when the purchasing power of a currency increases, and inflation is the opposite.
The purchasing power of ETH hasn't been very stable over time at all. It certainly hasn't been consistently deflationary.
If enough people are not on board, the majority can always fork and have their own chain. The best implementation then wins in the long run. That is the beauty of blockchains, imho.
It happened once with ETH vs ETC. BTC has been subjected to numerous shit-forks. Real valuable chain has persisted in all the cases.
>Arguing that an inflationary money is actually a better store of value than a deflationary one is not possible from an economic standpoint
See Krugman’s legendary article about the problem with deflationary currencies, such as the one used by the Capitol Hill Babysitting Co-op.
Long story short, he claims that people will hoard their deflationary currency because they expect it to go up in value over time. But if a large percentage of economic actors are hoarding their currency, there will be less economic activity and less output, and paradoxically, the value of the currency will go down rather than up.
Inflationary money IS better than deflationary money though. Deflationary money encourages hoarding, and discourages investment in value-producing ventures. Inflationary money does the opposite.
If society ran on deflationary money, that would act as a massive brake on the economy, and financial institutions would become risk-averse to the point where loaning money would be nigh on impossible.
Deflationary money is only better from a hoarding perspective, and I'd argue that perspective is counter productive for society as a whole.
Inflationary currency benefits the wealthy though.
If you are rich, you can get loans easily, and it's better to invest your liquid cash and get cheap money on loan, while everybody else has a constantly deflating account. So you get even wealthier.
A loan can be seen as a short on the currency. When you take out a loan, you bet that the currency tomorrow will be worth less than today. Which is what happens in an inflationary world. It would not be a problem if everybody could get a loan, but usually loans are directly proportional to wealth.
tl;dr: inflationary = good for wealthy people, accumulates money in the hands of the few. Spending is encouraged.
Deflationary = good for regular people, companies are loath to invest. Saving is encouraged.
The current inflationary economy only works for the wealthy. I’d extend this to say it works for the upper middle class and anyone who owns a house, which is an increasingly shrinking class of people.
Inflation entrenches and widens the wealth gap. A deflationary currency works for everyone. People still need things like food, housing, and so on — so they will spend the currency to get those things. When a good investment opportunity arises, one that outpaces the deflation, it will still be worth investing. You just have to be wiser about investments.
Age implicitly has more buying power in a deflationary economy. This is fine, and true anyway because age tends to have more deflationary assets now anyway (houses, investments, etc.). The difference is with a deflationary currency, they have access to a liquid deflationary asset — they don’t need to have a house or investments in order to maintain buying power. This is a good thing. That means people who NEED a house can have one; if the deflationary currency makes more money than holding on to a house, houses as investments make no sense anymore. This means houses become houses again, for people. This makes a more vibrant community of people when people can actually afford to live in places.
I can go on, but the benefits of an inflationary economy seem to me to be illusionary. Big number go up, wealthy people wealthier, poor people poorer, human condition significantly worse. Deflationary economy seems to me to remedy most of this.
> When a good investment opportunity arises, one that outpaces the deflation, it will still be worth investing. You just have to be wiser about investments.
> if the deflationary currency makes more money than holding on to a house, houses as investments make no sense anymore.
These can't both hold at the same time. Either the currency deflates faster than investments, in which case investment funding dries up, or it deflates slower than housing, in which case it doesn't help the cost-of-housing problem.
(As bad as the housing market is, concluding that it would be a good idea to make access to money work the same way is pretty backwards IMO; rather the right conclusion is that we need to legalise building homes).
> Deflationary = good for regular people, companies are loath to invest. Saving is encouraged.
You've explained why inflationary is bad but not why deflationary is good.
The starting point has to be history, where deflation has been accompanied by a lack of economic growth and high unemployment.
During the Great Depression, the dollar became a deflationary currency and the slowdown in spending certainly didn't make the economy serve regular people any better.
That's the canonical example of deflation you have to explain away.
Historically, we have not had worldwide light speed communication available to all, and deflationary currency transmissible at lightspeed absent any central authorities. I think we can take history with a grain of salt here.
While I agree that the internet has a huge impact on the economy, I don't think there's reason to believe it changes it in the way you seem to imply. In the absence of any very convincing argument to the contrary, the historical view seems very likely to be correct.
Pray tell, how do you mean the internet would make deflation favour the poor? I fail to see any mechanic or theory that would support the notion.
Unfortunately, the history of an inflationary economy not backed by any scarce asset is extremely short. Given our technological level and the amount of poverty, I would say it has been an abject failure. Society moves forward in spite of it, not because of it.
I can only share my opinions with you. If you need more, I’d recommend taking a walk through the poorest neighborhoods of your nearest big city and report back on how well an inflationary economy is working for those people. In an age of lightspeed comms, automated industry, a machine economy, etc., it is an embarrassment and gross negligence that any poverty exists anywhere on Earth, let alone at the mass scale it currently exists. At this technology level it is very difficult to have the level of poverty we have, but our inflationary economy somehow manages to make it happen.
If you can’t see it with how obvious it is, not much I can say to you. I’d recommend psychedelics to get started on the path towards having basic eyesight.
I fail to see how a deflationary system favours the rich any less than a inflationary system. We seem to agree that a deflationary system favours those with money in their savings account.
You know who has lots of money in their savings accounts? Rich people!
If you want the rich to share their wealth, a deflationary currency won't help you: you need socialism, or at least some policies that leans towards it. But that's an entirely different discussion, and completely unrelated to the effects of inflation Vs deflation.
The key phrase is "As a store of value". I'm not debating if this is good or bad for the overall economy.
If you have the exact same fungible asset, and you have a choice to inflate or deflate the supply, deflating is always going to be better for its value because there is less of it.
Even if no change could ever be made again to Bitcoin: it is not an inflationary money in the long term.
Only during the current predictable and necessary bootstrapping phase where there still exists a block reward (until ~2140) is the total circulating supply gradually increasing.
After this point it is neither inflationary or deflationary for supply reasons (although as people lose coins it may be very slightly deflationary).
Ultra sound money cannot be money with a monetary policy on moving sands that can change because Jerome Powell and his buddies decided it was a fun experiment...
A meme is a unit of cultural information or a unit of imitation. When you call something more than a meme, as weird as it is, you're pretty much saying that it's not a cultural, but a hereditery piece of information (a gene). Calling Ethereum a meme is fine, it is something people do. But, calling it a gene is something else. I don't know that you know what you're saying. To be honest, some of us would prefer if you kept your low effort comments (posted through throw away accounts) to yourself.
Eip 1559 saved eth holders billions of dollars. It's not possible to perfectly design a system from the start, and in fact ethereum was explicitly started as a work in progress.
Bitcoin would need massive changes to even have a potential to become money. Currently it's the antithesis of money - not backed by anything, in fact the opposite - requires billions per just to function.
Could you summarize? I read the introduction there, but am not planning to buy the book. The intro there hints toward a theory with this:
> The book also made huge theoretical advances. Rothbard was the first to prove that the government, and only the government, can destroy money on a mass scale, and he showed exactly how they go about this dirty deed. But just as importantly, it is beautifully written. He tells a thrilling story because he loves the subject so much.
> The passion that Murray feels for the topic comes through in the prose and transfers to the reader. Readers become excited about the subject, and tell others. Students tell professors. Some, like the great Ron Paul of Texas, have even run for political office after having read it.
It seems obvious to me that only the government can destroy (and indeed create) money, but I'm not sure how someone could claim to be the first to have proven that. From that last line I can infer that the general thrust is libertarian?
But the rules can be dumb. The exponential decay of rewards is, in my opinion, wildly unethical and leads to great harm. It permanently creates a system of haves and have-nots. That a system that cannot be changed is not in any way evidence that the system is good.
We could imagine an alternative system that Satoshi programmed that, once per year, chose 5% of wallets at random and marked those coins as invalid, permanently destroying them. That would be an unchangeable system but it would also be idiotic. Just because there isn't a bureaucrat does not mean that there is no policy.
Right. Some people in crypto will be baffled that eternal inflation is a built-in feature of some cryptocurrencies since one of the motivators of Bitcoin was to stop inflation caused by the fed printing money at will.
Bitcoin, FWIW, currently (it will slow down and eventually supposedly stop) prints money every block to pay for mining. It does this to fund a public good, which is network security, under the assumption that people who store large amounts of money would be willing to pay more to protect that money than people who store small amounts of money, and in the early years (which we apparently are still a part of) it is considered that fees for transfers aren't where most of the payment could be derived. (Personally, it isn't clear to me that the network makes sense to be paid for entirely by fees. Ironically, AFAIK on Ethereum the percentage of the block reward paid for by fees is much higher than Bitcoin and their minted block reward will continue on forever.)
This, to me, seems definitely like "inflation", caused by an increase in the money supply by a shared governance structure. It certainly isn't "deflation". Bitcoin does describe it not as printing money but as unlocking money that was already set aside, but what matters today (as opposed to whenever the rewards stop in the future... I don't remember off-hand when that will be) is the circulating money supply, not the theoretically existing / allocated supply (which is why if you lose money forever it is the same as destroying it; and which can also be seen because, if the US Fed merely had pre-printed giant fat stacks of cash that they've been dipping into for all these years, you wouldn't know the difference between that and it printing bills).
> seems definitely like "inflation", caused by an increase in the money supply by a shared governance structure
It's a money-supply increase. Depending on whether one Bitcoin buys more or fewer goods, it's inflating or deflating. (Currently, deflating, since Bitcoin is going up relative to the dollar and goods are priced in dollars.)
What's really curious is that Bitcoin's advocates claim it's the ultimate inflation hedge, "sound money" that will hold its value while "fiat money" is debased.
Then at the exact moment "fiat money" has a spike of inflation at 8% to 10%, the value of the "sound money" inflation hedge plummets 70%.
Now, at the exact instant it appears "fiat money" inflation is moderating, suddenly the "sound money" jumps up 35% from its lows.
Why on Earth would an inflation hedge decline dramatically when inflation shows up, and then increase when the inflation rate declines?
>Then at the exact moment "fiat money" has a spike of inflation at 8% to 10%, the value of the "sound money" inflation hedge plummets 70%.
>Now, at the exact instant it appears "fiat money" inflation is moderating, suddenly the "sound money" jumps up 35% from its lows.
Because a devaluation of the dollar is not what's actually causing the price of BTC to appreciate as much as speculation about the future monetary policy that could come as a result of lower inflation numbers (i.e less hawkish Fed). Which is funny because the way the CPI is calculated has been very controversial and subject to change. One common narrative is that the Fed will be forced to pivot to avoid a major recession.
It's not just BTC but the stock market in general behaving this way.
> Why on Earth would an inflation hedge decline dramatically when inflation shows up, and then increase when the inflation rate declines?
You're not wrong, but this also is a reminder that BLS inflation statistics are not exactly 'inflation'. They actually are more reliable as a harbinger of Federal Reserve policy in coming months, and so have the opposite impact on current asset prices one might expect.
If not the statistic, what is 'inflation'? Well, it's way simpler than the BLS would have you think. When 1BTC goes from $500 to $50,000, that's inflation. Maybe the BLS didn't notice, but you did, it was pretty obvious. This lesson teaches that the issue actually is inflation rolling from one class of goods to another and in this case it's obvious-- where BTC inflated first, a leak of that value out to general goods will result in or reflect a decline in BTC prices, especially where this catches the BLS' attention and signals that the Federal Reserve will do something about it.
It might be the ultimate risk asset. Seriously. There are entire classes of financial models we discarded for involving magic variables which quantified the state of the market's animal spirits. Crypto my let us estimate those.
OK, you "win" (I think), though at that point I feel like the term isn't going to mean anything useful anymore as applied to a commodity... like, on a moment to moment basis we don't describe the US dollar as inflating and deflating despite it constantly having small adjustments with respect to its value: we track the large-scale movements specifically caused by economic policy that changes the circulating money supply (whether by the Fed or by individual banks or even by things like relative wages).
Yes. As (I tihnk it was you) said in a sibling comment, supply expansion/contraction has a very significant meaning for a commodity though and that's really what happens with crypto. It's a bit frustrating to me the way in which the crypto community reuses various "tradfi" concepts but with slightly incorrect terminology etc.
I was referring to something like ATOM. BTC has a limited supply so it won't inflate past a certain period, but ATOMs inflate each year and if you're not staking them, you are effectively becoming poorer year to year.
The double whammy is you also get taxed on that yield so for chains that are paying yield with inflation you're actually losing money by staking.
They really do need to be transparent about what the actual yields are (return - inflation). AFAIK Ethereum is the only chain that gives a positive return after taxes because it's deflationary.
The exact quote from Kraken's site is "Stake for up to 20% APY." The APY is different for each coin and is measured in that coin, not in USD. For example, ETH gets you around 4% APY as of writing. The money comes from staking rewards, which are typically new money minted by the algorithm. (You could call it inflation)
Since the merge Ethereum has had net negative issuance. Ethereum's yield is not coming from dilution. The network is profitable, the profit is distributed to token holders and validators, plain and simple.
I didn't say anything about dilution. Ethereum's yield comes from (I'll try to follow your terminology here) the gross issuance, which looks to be the green gauge called "issuance" on that site and is a positive number. Fee burn is unrelated to that and floats around randomly based on network usage (issuance was net positive a month ago) and GP didn't ask about it so I didn't think there was any reason to add confusion.
Ethereum´s current issuance is 0.55% (654K ETH per year on a circulating supply of 120M, source: https://ultrasound.money/). This is split between the validators which are now around 13.7% of the network (source: https://beaconcha.in/). Resulting in a yield from newly minted ETH of 4%.
The other 25% of the yield comes transaction fees and MEV.
On top of that the ETH consumption through the burn more than compensates the newly minted ETH. As the network is net deflationary (source: https://ultrasound.money/). You can think of a company that pays employees partly with stock options but has also a buyback program. If the buyback program that comes from its ability to generate profit more than compensates the newly issued stock, the employees pay in stock is not self-dilutive.
What I'm basically getting at is that, if the network is not seeing net issuance (i.e. roughly flat or even negative), then the newly minted ETH is real yield. By the simple fact that nominal yield - monetary inflation is positive.
That's exactly what happens here because new coins minted for stakers have any value only because new investors purchase the currency and prop up its price.
Once new investors dry out and price collapses stakers will be rewarded with same amount of coins now worth nothing (just like IOU in Ponzi) and will be left with staked coins of 0 value, just like in Ponzi.
> That's exactly what happens here because new coins minted for stakers have any value only because new investors purchase the currency and prop up its price
One could design a "staking" system that is directly reliant on other people's money coming in for your payout to happen. This is not what is happening here.
Staking as done by this protocols itself never promised you anything but a yield in the crypto currency itself.
Maybe you think crypto in general is a ponzi scheme because people only want to sell to new entrants for a profit, but that's a different issue (not not necessarily true - it also works with a fixed set of people you keep wanting to gamble).
> Staking as done by this protocols itself never promised you anything but a yield in the crypto currency itself.
That's a fixed percentage promise. There's relly no difference if it's expressed in crypto coins or in entries in the database of a software system of ponzi schemer.
If you have a fledgeling crypto on its ride up, it's not only fueled by new investors but sustained by new investors. If the coins are minted at will the supply will eventually exceed the demand and the coin will start loosing its value. And then the inevitable crash to the bottom happens. It's crypto equivalent of hyperinflation of normal currencies that happens when money supply exceeds demand for money associated with economic development.
> Maybe you think crypto in general is a ponzi scheme
I don't. I just feel like promising fixed, large percentage gains makes something Ponzi scheme. Something like Bitcoin or Ethereum that have tight control on coin supply are not ponzi schemes. Those are just new type of commodity. Mildly useful, but scarce, unique and easily transferrable and divisible.
So do stocks and fiat currency though; it's not the crypto that generates revenue, it's what's done with e.g. investor money that makes it more valuable.
Where does a bank account's interest come from? It's fiat currency, it generates zero revenue just sitting in an account. But the bank invests it, by e.g. giving people loans for which they pay interest. Likewise so with cryptocurrencies and so.
In theory anyway, I'm an amateur but IIRC staking is a way to enforce stability in the crypto market, lock currencies into place to have some guarantees for the future and for certain projects that require currencies / things being locked in.
Banks make loans for people to buy houses and they pay interest, or they start a business and the business pays interest on the loan. There's economic activity that generates a return. All the crypto "loans" seem to be loans to each other using tokens and they pay interest in the form of more tokens. There's no fundamental economic activity. The only money they seem to make is betting that other cryptocurrencies will go up or down, using leverage. And then when crypto falls all their investments lose so much money they go out of business. It just seems pointless speculation, and this is visible in that the ones that fail are shown to have all loaned money to each other and so it's a true house of cards.
There's just not much actual purchase of real goods with crypto, no one buying in the store. So the crypto itself serves no purpose other than as a financially lucrative asset.
The fees, when realized into gains, are worth more than the cost to run the validation? Are the validators converting back to pay for their costs? Or paying for them some other way?
Does it stay profitable if ethereum drops to 1% of its current trading value?
When people pay fees for transactions most of that fee is burnt.
Blocks have a fixed amount of rewards given to the validator that created them and the validators that attest it is valid.
When more fees are being burnt than Ethereum issued in blocks it is deflationary. It is deflationary at ~16 Gwei and fees have been higher than this for a while now.
Validators cost very little to run, they're usually NUCs that use 20w, the main cost is the Ethereum you have to stake.
https://ultrasound.money tracks this. You can play with the sliders projecting things out depending on how much ether is staked vs what the sustained transaction fees are.
It's unclear to me by looking at these numbers that the network is profitable. Profit is the difference between revenue and cost, so we need to know the amount of fees earned and the operating expenses.
Ethereum measures its "costs" as issuance paid to stakers while measureing "income" in the amount of eth burned by users via gas fees paid to transact on the network. Since the merge, there has been about 15K more eth burned in transaction fees then has been issued to validators.
Both issuance of eth and fees are forms of revenue to validators. You're saying that revenue is predominantly in the form of transaction fees. This is just one part of the equation. The other part is costs, and this doesn't tell us anything about the costs incurred by the validators. Therefore no conclusions about the profitability of the network can be inferred from this data.
The cost is all the money paid to validators, which is currently less than the revenue the network receives. This is on the ultrasound money website and also token terminal (and a few other places)
The cost of running the validators is irrelevant to Ethereum (though it is tiny), it'd be like saying you have to calculate employees lifestyle costs to figure out the "real" cost to a company. The cost is the wages you pay the employees (the rewards given to validators) not how much the validators spend.
Sorry, aren't these "validators" part of the network? They run the network, don't they? The money that they get paid is therefore revenue, not a cost, from the standpoint of the network.
It seems like you’re making a semantic argument to equate the Ethereum network with its validators. That seems confusing. Here are some examples of how “A runs B” does not imply “A == B”:
“Employees” are part of a company, they run the company, don’t they? Yet the cost of having employees is not “therefore revenue” from the standpoint of the company.
“Drivers” are a part of Uber, they deliver the service, don’t they? Yet the money paid to drivers reduce Uber’s profits.
I think where your argument runs into trouble is “from the standpoint of the network”. If you want to equate the network and its validators, to say they are the same thing, then your sentence becomes, “The money [the validators] get paid [by the validators] is therefore revenue, from the standpoint of [the validators]”. That’s non-sensical. You can’t give yourself money and say it’s revenue. Either these two things are in fact not the same thing and we can analyse the cashflow of “Ethereum the network” separately from “the validation service providers”, in which case Ethereum is paying out less than it’s taking in, so it is profitable. Or they are the same thing, in which case the “profit”, to the extent you can say a virtual entity like a network can have such a thing, is even higher.
This is because whatever costs the validators bear are less than the ETH they receive is worth. This is true if we assume validators are rational actors (they wouldn’t validate if they were losing money doing so). And even if we take away the assumption that they are profit motivated (maybe they’re all doing it as charity work for some higher purpose), the cost of running an Ethereum validator is tiny, so we end up in the same place: outgoings are smaller than receipts when considering the whole.
(The fact that Ethereum the network “burns” its receipts and then “mints” its outgoings to the validators does not affect this calculation since it’d work out the same if Ethereum paid validators from fees directly.)
Seriously, this isn't rocket science. Ethereum provides a service, namely it stores data and does some computations in exchange for a fee. Ethereum users pay a fee and in return they have their computations done. By definition, Ethereum is profitable if and only if the fees that are paid by its users exceed the costs that are incurred by whoever is in charge of doing the computations and keeping the network running. (I thought these were the "validators" but I might have got the terminology wrong, apologies if this is the case.) Therefore we need to know, on one hand, the total amount of fees paid by the users and, on the other hand, the total amount of costs incurred by the network (i.e. by all the entities that do the computations and run the network), over a particular time frame.
The disagreement here seems to be "how relevant are the real world costs and profitablity born by ethereum node operators and validators to the overall 'costs' of running ethereum"?
You seem to think that is the end all be all to measure the profitability of the network. And you aren't entirely wrong. If it requires too much hardware, too much internet bandwidth, too much in the way of skilled node operators relative to the value the folks running the nodes would gain, the number of particpants would dwindle and the physical network would suffer.
So there are boundaries that real world costs impose on the operation of the network. But at what level do those boundaries kick in? Well, that is why it's been an important value to the developers that a node can be run on 'commodity hardware and internet'. You can run a full node on a standard Pc from the last 5 years with 16gb of ram (less in some configurations), a 2 tb ssd (or 1tb if you don't mind some downtime every few months), a modest internet connection and can be done so by anyone with some basic command line skills.
Because of those modest demands, I can and do run a non-validating node on old hardware I already owned on an internet connection I would be paying for anyway. I make $0 from doing so, but it interests me as a hobby because I want non-intermediated access to the the network. In contrast some large node service providers have immense costs because they host on a cloud services and they hire expensive SRE's to keep it running at a high reliability level. But they woudn't be spending that money if they didn't seem some kind of profit or value in it. Because of that variability and the low baseline to get started, whether it is real-world profitable to any particular participant is irrelevant to "ethereum" as a whole.
So, from my view, it becomes reasonable to look at it as "how much ether is created vs how much is burned" to see if "ethereum" as a whole is profitable.
I don't know if it's relevant, I think it's interesting, to me at least as an economist, to ask these questions. What you do with this information is up to you.
Whatever that number is, it will be equal or less than the number already discussed. The network “hires” contractors to provide the services you mentioned and it pays a known figure for that. Not much else to it really. Since all we are discussing is whether the network is profitable or not in this thread we don’t need to dig into more specific analysis of the service providers’ internal costs (and indeed that would be difficult since they are globally distributed with different attendant costs and efficiencies). Just to note they are unlikely to themselves be making a loss is sufficient.
No, the costs incurred in providing a service is exactly what needs to be quantified in order to determine whether the provision of that service is profitable. If you insist that the contractors must be excluded from the analysis (for some reason), then you have to admit the possibility that the network is being subsidised by the contractors (as would occur if they were operating at a loss), at which point the entire concept of profitability of the network becomes rather meaningless. So you can't exclude the contractors. And you can't simply assume that contractors are unlikely to be making a loss either, because that's exactly the question that we're asking.
Yea the costs are the tokens it pays to validators. I'm not sure what you don't understand about that. Ethereum the network takes payment for transactions, and pays validators for validating. It is profitable because it currently takes more payments for transactions than it pays to validators. All of this is on the sites I mentioned.
How could validators possibly be revenue? Maybe it helps if you visualize them as contractors who do a job for the Ethereum network, and get paid for that. How the contractor manages their own budget is irrelevant to Ethereum.
Good heavens. The contractors are the network. If you leave the contractors out there's nothing left. There's no network. The network doesn't take payments. Contractors do. Other than that of contractors, there is no economic activity. In this view, the network is neither profitable nor unprofitable, since the entire concept of 'profitability' refers to an economic activity.
Nobody is doubting that transactions aren't worth what people pay for them. The doubt is whether the fees that users pay exceed the costs of operating the network.
90+% of the transaction fees are not paid to validators. They are burned or thrown away. That reduces the supply of eth to the benefit of all other eth holders.
But it's still a Ponzi scheme in that you're paid out in the thing you stake, so you don't necessarily have any more value with respect to an external reference.
For all practical purposes, you could exchange the currency for something else. But that's outside the scope of the staking system as defined.
I'm not making any negative or positive judgement on the system, Ponzi scheme is just a description of how it operates. Similarly, any stocks that does not pay out dividend is also a Ponzi scheme.
That’s not what a ponzi scheme is though. The most important thing about what makes a ponzi scheme a scheme is that the person running the scheme is obfuscating where the money being paid out comes from. It’s when someone pretends they’re doing something highly profitable to attract investors, but actually when they pay people with what they claim is profits they’re actually just using the money from other investors. The defining feature of a ponzi scheme is not that if no one would be willing to buy if off you, if would have no value (that’s definitionally true of all objects). It’s that if new people stopped investing in the company, the company would fall apart. There is no value in a ponzi scheme separate from more money piling into it.
This is very different from a stock that doesn’t pay a dividend. While you’d never get money out of it if no one was willing to buy it, what stocks generally promise is some amount of ownership and voting rights in a company (which theoretically could result in dividends, if enough stock holders agreed). That said ownership ended up not being valued by other people does not make it fraud. You can certainly feel free to believe that stocks that don’t give dividends are worthless though, that’s a separate question really.
I generally come down on the side that the major cryptocurrencies aren’t ponzi schemes, or fraud in general. (Plenty of fraud in the shitcoins, of course). Ultimately you decided to buy a data point on a ledger in a distributed system, and that’s what you get. But…well, mining sometimes confuses that. Without enough people coming into the system to buy new coins, the miners would start shutting down until none were left. Much like a ponzi scheme, crypto currencies seem reliant on new blood to keep functioning to me. Don’t know if that makes them a scheme necessarily, but they’re more adjacent to it.
The definitions you use match the recent failing crypto exchanges behavior. They completely obfuscated what they were doing. They had made loans if hard crypto assets to other companies, other exchanges, and either refused to describe the situation or outright lied about it.
>Simple question: how is that guaranteed yield sustainable if not through a Ponzi scheme?
Let's say you buy 100 digital widgets from me. I promise you a 20% rate of return if you stake those widgets back. A ponzi scheme would require me to lure in new "investors" and take in new funds in order to pay you the 20% return you are promised. However, I can sustain this process forever without ever having a single new investor. I'm paying your APR in digital widgets, not any sort of actual currency. With the stroke of a key, I can create as many digital widgets as I need, and give you your 120 widgets after the year is up. However, there is no guarantee what your digital widgets will be worth - that's the rub. It might be characterized as a scam, but it isn't a ponzi scheme.
> Most concerning, though, is that our solution to a failure to register violation is to shut down entirely a program that has served people well. The program will no longer be available in the United States, and Kraken is enjoined from ever offering a staking service, registered or not. A paternalistic and lazy regulator settles on a solution like the one in this settlement: do not initiate a public process to develop a workable registration process that provides valuable information to investors, just shut it down.
A program "that has served people well" ... yet is both optically and legally the same as "Gemini Earn", which has currently lost everybody's money.
When dealing with creative villains, the lazy approach is sometimes best. If Kraken can't manage the bare minimum on compliance on their own, there is no reason the government should help them; better to be "lazy" and shut it down.
What? Isn't she the one most fervently working against increased stock market transparency? I'd say apart from this little quote she's by far the least sane voice at the SEC from what I've seen.
So I guess we know which SEC commissioner is a crypto-bagholder then.
If crypto offerings are not making it through the registration pipeline, perhaps its because of the massive risks and manipulation inherent in the ecosystem, making it effectively impossible to "provide full, fair, and truthful disclosure and investor protection"
> So I guess we know which SEC commissioner is a crypto-bagholder then.
I've seen this kind of argument all over different forums recently, and I find it bizarre:
1. Someone posts a reasonable, logical point on a particular topic.
2. Someone else disagrees, and instead of finding fault with the argument, they make the comment "poster must just be a member of <tribe I disagree with>".
To be blunt, it makes your argument incredibly weak. It makes me think you are the type of person who is so wedded to your tribalism that you can't fathom that other people can have logical thoughts that are not based on their tribal membership.
I may think 99% of crypto deserves to die in a fire, but I thought this was very well-reasoned commentary by the SEC commissioner.
I have found fault with the argument, you just needed to read past the first sentence of my post. I think the fact you clearly haven’t makes your response very weak.
She’s complaining that there is no real way for crypto companies to register these schemes because they don’t get through the registration pipeline. I’m positing that that’s for very good reason.
> I have found fault with the argument, you just needed to read past the first sentence of my post.
My whole point is that you should have left that first sentence out. It immediately makes me discount your comment because it is insincere and points to you making emotional arguments that are pulled out of thin air.
But what _is_ the reason they can't get through the pipeline (and that you think is a "very good" one)? Isn't just the SEC saying "We don't feel like answering your request. Continue as you see fit, but we can't promise we won't come after you for whatever reason"?
> the massive risks and manipulation inherent in the ecosystem, making it effectively impossible to "provide full, fair, and truthful disclosure and investor protection"
I don't know for sure, as I don't work for the SEC, but it certainly seems likely that if cryptocurrency-centered securities aren't getting through the registration process, it's likely because cryptocurrency and cryptocurrency asset prices are inherently massively unstable, subject to manipulation by unknown forces uses both fair means (large currency and cryptocurrency hodings) or foul (looking at you tether), and in general it's probably not possible to provide such a disclosure or any real evaluation of risk.
And that's if the players involved are honestly attempting to do that, many/most players in the crypto space seem to be cowboys.
> Isn't just the SEC saying "We don't feel like answering your request. Continue as you see fit, but we can't promise we won't come after you for whatever reason"?
No.
The SEC is saying that these schemes are securities, and you categorically cannot operate unregistered security schemes. The SEC is saying that these things must be registered, and until/unless they are registered they must stop.
This one commissioner is then saying "But that's not fair because we don't see crypto security schemes getting through the securities registration process".
I don't think she's wrong, they probably aren't getting through even if they do apply, but I also don't think the denial is wrong - it seems highly unlikely they can meet the criteria.
And dear god no, we should not be carving out exceptions to the securities laws for crypto-hucksters to get easier registration status without having to meet the same bar for honesty, transparency and investor protection as 'traditional' finance schemes.
> This one commissioner is then saying "But that's not fair because we don't see crypto security schemes getting through the securities registration process".
This appears to be a misrepresentation of Peirce's statement. She isn't saying that it's not fair that the SEC isn't letting these things get approved, she's claiming that the SEC isn't doing its job and isn't providing clarity on why they aren't getting approved and how they can get approved in the future. Clarity can be as simple as "we beleive that the volatility makes crypto offerings too risky", but they're instead making one-off settlements and vague statements.
There have been crypto products that were held in limbo for years without clarity on why they were being rejected by the SEC, which is irresponsible on their part.
No, that's what _you_ think the reason is or should be. I'm asking what the reason (or answer) is that the _SEC_ gives in the application process.
> The SEC is saying that these schemes are securities, and you categorically cannot operate unregistered security schemes. The SEC is saying that these things must be registered, and until/unless they are registered they must stop.
My question was about the registration. If you _want_ to register, and the SEC replies with "<silence>", what are you supposed to do? Or if you ask if you should register, and get met with silence. I don't disagree with your assessment of "The SEC is saying that these schemes are securities", but instead of answering the question upfront they seem to prefer to punish/fine after the fact. Worst of all, they ban Kraken from ever offering any staking services in the future, even _if_ there is/will be a legal way to do it.
I _understand_ Gary's SEC's stance of keeping everything deliberately vague that way, because it gives him a lot of power to punish and discriminate on a one-off basis. I agree with Peirce (and CFTC's Pham) that's it's a bad and very lazy way to "regulate" (air quotes) though.
> If you _want_ to register, and the SEC replies with "<silence>", what are you supposed to do?
Not start selling your unregistered scheme! That's the point here, in terms of what actions you are allowed to take, if you don't have registration, you cannot sell the security.
It's not that they 'prefer' punishing after the fact - there's not supposed to be a fact.
Your options are to walk away or find some way to get them to take action. Your options do not include "fuck it we'll just go ahead and see if it bites us".
Kraken is paying a $30M fine to the SEC because this “staking” is an unregistered security.
From the initial CoinDesk story:
“SEC Chair Gary Gensler has previously said he believes staking through intermediaries – like Kraken – may meet the requirements of the Howey Test, a decades-old U.S. Supreme Court case commonly used as one measure of whether something can be defined as a security under U.S. laws.
Staking looks similar to lending, Gensler said at the time. The SEC has brought and settled charges with lending companies before, such as now-bankrupt lender BlockFi.”
I believe they end up reducing the federal deficit in a roundabout way. The SEC has a budget of about $2.2 billion from Congress. But the money it collects from registration fees and enforcement activities is normally more than what it received, so it pays back with extra at the end of the fiscal year.
I think the point is to establish some precedent that what Kraken was offering actually was an unregulated security, something that might not have been completely clear before this. I doubt that the Fed is deeply concerned about Kraken beyond that.
I think that's the point? The SEC doesn't want an issue where Kraken loses all the funds because they didn't actually stake anything at all and instead were investing in tulip futures.
I hope it was sarcastic. At this point, are there any exchanges that aren't doing untoward things with their customer's assets? We basically have exchanges that failed doing this and other exchanges with ambiguous descriptions of what they have done that haven't failed yet.
I doubt it will push a significant chunk of these users to self-custody. Self-custody is significantly more complicated than leaving assets on an exchange—which is why most people don't do self-custody. I'm sure this will drive some to self-custody. But I don't imagine it'll be a very large percentage.
Is it tho? A MetaMask wallet staking directly with the protocols/ yield aggregators is easier than creating a kraken account and doing KYC verification.
self custody vs. centralized exchange data would be relevant here. Instead of just saying “people don’t do it”. Because people do… and I would venture to say more people do it than keep their coins on a centralized exchange.
That may indeed be "easier", but self-custody requires a high level of confidence in your own ability to set things up properly and securely. And equally high confidence that your machine and wallet won't be compromised. I'd also say that getting to that point is difficult, unless someone is willing to play around with a test-net and not learning with their real balance.
There's definitely an appeal when it comes to having an exchange manage this all for you, even when they take a fee for doing so.
This may come off as… impractical… but I don’t understand why.
The best way to obtain coins without going through KYC is by using the protocols. The most cost effective is running a filecoin node but there are thousands of ways of getting coins by participating in the ecosystem.
Right. I self custody most of my stuff, but I do stake a few coins with Kraken because the amount is relatively small and it's easier. Taking away this service is annoying.
Thanks for posting. Summarized the problem for the SEC is that they want to protect investors by adding regulatory overhead to the services of the vendor. In the end the service provided by the vendor won't be attractive for investors anymore. I wonder why I, as an investor, can't choose to opt out from these protections.
This is healthy for proof of stake. Exchange validators tend to be slow to upgrade software, and do not engage with the community or participate in on chain governance votes. They are not accountable to delegators because the funds that they stake come from low-knowledge speculators, and they also are not exposed to the token's price movements much.
Kraken was one of the best as far as exchange validators go though.
I thought the consideration for clients staked ETH was fairly generous!
What does this mean for existing staking clients in the U.S.?
U.S. clients will not be able to stake new assets.
Previously staked non-ETH assets will be automatically unstaked. These assets will be returned to the client’s spot wallet and will no longer earn rewards.
Kraken will prorate final rewards through February 9. These rewards will not become staked. Kraken will instead pay rewards out in their non-staked form.
All staked ETH will become unstaked after the Shanghai upgrade and will continue to earn rewards until then. There are no changes to the payout structure until after the Shanghai upgrade, when ETH will be unstaked.
There's not really any other way - there is no way for anyone to unstake ETH right now (and there's not even a certain timeline for when people can get their money back!) - that's not a kraken limitation, it's a problem (feature?) of ethereum.
Kraken can't pretend to unstake customers' ETH and stop paying rewards because they have no way of returning the underlying coins to them.
They can just pay the customers and keep what is stuck as their own asset. From what I understand, kraken can stake their own assets but they can not stake assets for others.
True, but at the moment the funds are locked until next month when Ethereum has a network upgrade (Shanghai). If they credited users ETH directly now, they may not have enough liquid ETH on the books if everyone were to withdraw before the upgrade which would remove all trust in the exchange.
They might not have the extra money. If (let's suppose) customers have sent 1 million ETH to Kraken that's now staked, Kraken would need another million ETH just laying around in order to do this.
For something like this you can definitely get a loan or not? They have the ETH, it is just locked up and out of all the coins it is the second least likely to go to Zero tomorrow.
Kraken have two options for staking on some cryptos assets like ATOM or DOT:
- "flexible" who is more easy to unstack and rewards around once a week
- "bonded" with the staking locked until the end of a period (up to 28 days)
If i have understood correctly, in the first case, it's a sort of fake staking done by Kraken as an intermediary. And in the second case it use the real staking mechanism of the asset.
So did kraken stop both way of staking in the US, or only the "flexible" one whe he is an intermediary ?
This seems obvious and not remotely over reaching.
The SEC press release[0] makes a clear distinction between decentralized staking and centralized promising to stake on behalf of a customer. Promising to use funds in a specific way to generate a specific return sounds like the most obvious security. Nobody should be surprised.
> this sounds like a definition of a fixed income bond
Bonds are securitised loans, which are not securities per se. It's a somewhat arbitrary boundary that rests on the degree to which a secondary market exists. But just because something is loan-like doesn't make it a security.
Bonds are securities. Loans aren’t always. (Government debt in the form of Treasuries are securities. Government debt in the form of accounts payable are not.)
The alternative is a bank account. That's not a conversation anyone in crypto wants to have.
Longer: yes, it does. You're investing money with the expectation of profit. For on-chain staking, the common enterprise and effort of others tests are ambiguous. But here, you're not staking on chain. You're giving money to Kraken to stake for you. Security. (Again, it looks more like a savings account, but nobody wants that.)
It seems to me that by this description, whether or not it's a security is basically how it's marketed?
You could also explain such a product as simply a custodianship that is able to hold your eth in a staked state for you, with no promise of return at all, only a claim to whatever the staked eth amounts to in its own domination at the time you'd like to withdraw.
Also these returns are denominated in the staked currency, there is no - and had never been - a promise of returns in USD. I don't actually know: does that make a difference, technically speaking? It would seem that it should.
> whether or not it's a security of basically marketing?
Not basically, but substantially.
> could also explain such a product as simply a custodianship that is able to hold your eth in a staked state for you, with no promise of return at all, only a claim to whatever the staked eth amounts to in its own domination at the time you'd like to withdraw
Custodianship is a big word in finance [1]. There are crypto custodians, and I'm guessing they let coins be staked. But that isn't something you can easily scale to retail.
> there is no - and had never been - a promise of returns in USD
Not relevant. You can issue stock that pays dividends in piñatas. If it's sold to Americans, the SEC has jurisdiction.
> Isn't this because the stock itself is already a security, not because of whether or how it pays dividends?
Whether it pays dividends, at all or in what form, is irrelevant to whether it's a security. That Kraken didn't pay out U.S. dollars isn't relevant to the question of whether they were offering securities.
Yeah that makes sense but that's not what I was meaning to point out. You said this:
> You can issue stock that pays dividends in piñatas. If it's sold to Americans, the SEC has jurisdiction.
So whether or not the stock issues dividends in eth, USD, pinatas, or not at all, doesn't matter. The SEC "has jurisdiction" simply because a stock is already a security to begin with, right?
What I'm asking is, if dividends are not relevant, how is the SEC able to step in specifically in regards to dividends in this case?
The way you phrased it, I would understand it to mean that if you can hold the token (or stock, equity, security, etc) on behalf of a user to begin with, then you'd be able to issue the dividends without further approval. Is that understanding incorrect?
> if you can hold the token (or stock, equity, security, etc) on behalf of a user to begin with, then you'd be able to issue the dividends without further approval
Staking returns are more similar to stock lending than dividends. They don’t automatically arise from owning a token.
>Is it a "promise" if it's a guaranteed algorithmic result?
No, and that's what decentralized staking is. That's fine and the SEC is explicitly not taking issue with it.
Centralized 'promising to engage in decentralized staking on a customer's behalf' is not guaranteed or algorithmic-- which is why it necessarily causes said customers to "take on risks associated with those [centralized] platforms," to quote the SEC, and thus becomes a security.
That seems like a traditional contract between provider and consumer more than a security.
If I own a dividend-bearing stock on Charles Schwab and they don't pay me the dividend, it's not because Charles Schwab offered a security, they're just being fraudulent.
ChatGPT (for what it's worth): When people talk about "securities," they usually mean financial instruments such as stocks, bonds, and derivatives, rather than specific types of payments made to shareholders. In this broader sense, dividends are not considered securities themselves, but they are closely related to the securities that represent ownership in a company.
What does there being a contract have to do with a security. Bonds are contracts that pay at at fixed points and rates, they are fixed-income securities...
Bonds are a "promise" because they can fail - the issuer can fail and the bonds can become worthless. So there may be a reasonable expectation of return, but still risk. Staking is not the same, because it is the algorithmic inflation of the currency itself, and can't "fail" the same way.
Bonds are a promise, because they are a contractual obligation to satisfy "the promise". That's what a promise is. That the fulfillment of the promise is predicated upon the efforts of another, is what makes a promise a security.
Thanks, this phrasing makes more sense to me than the other explanations I've read.
But if kraken already is approved to hold crypto for users, what makes staking it different? Aren't they already promising just to hold it and return it? It feels like the same promise.
Well in this case it depends on their conduct and ability to do so which isn't solely algorithmically determined as is evidenced by the numerous other centralized stakers that have collapsed, taking the money with them. I'm under the impression Kraken can take the crypto and do what they want with it, so long as they keep their promise to you. That's exactly what a security is.
I think the distinction is that with a bank's savings account, you are guaranteed your money back, they have all sorts of rules that apply to banks to make that true. Obviously crypto folks don't want it characterized as such an account as that would result in even more onerous limitations. In a decentralized system, there is no person in the way, whose conduct can change whether or not you get the money.
Staking "can't fail" in the same way that a sovereign bond can't fail, since the issuer can always make the promised payments by issuing more worthless tokens. In other words, staking can absolutely fail.
It might be possible that you have a point but you have to expound on it for it to be clear. When you jump to "in other words..," I don't know what you're talking about.
> own a dividend-bearing stock on Charles Schwab and they don't pay me the dividend, it's not because Charles Schwab offered a security, they're just being fraudulent
When you buy a dividend-bearing stock on Charles Schwab, you're given access to shareholder documents describing what you are owed under what conditions. There is no analog for crypto. The investor's interface is with Kraken, not with the chain.
This isn't an insurmountable problem! But every staking product I've seen mimics a high-yield savings account more than the FX-linked security that it is.
I don't understand how they're different. Charles Schwab is a middleman to the company (say Exxon). Kraken is a middleman to the Blockchain. That seems like a clear analog, and not only that, but the code, the law of the Blockchain, is certainly more publicly available and less prone to change or failure than shareholder documents, which represent legal contracts, but are still susceptible to human error.
> Charles Schwab is a middleman to the company (say Exxon)
Charles Schwab is a middleman to the market. Exxon separately puts out disclosures. Charles Schwab and Exxon never need interact for this to work.
> Kraken is a middleman to the Blockchain
Agreed. Which is why it should be regulated like Charles Schwab.
The SEC isn't going that far. It's just saying if you want to take peoples' money and pay a return on it, you need to do the things others who do the same must.
> the code, the law of the Blockchain, is certainly more publicly available and less prone to change or failure than shareholder documents
This is a valid hypothesis. To the extent it's been tested, the opposite has been (inconclusively) true.
> The SEC isn't going that far. It's just saying if you want to take peoples' money and pay a return on it, you need to do the things others who do the same must.
Like what? I'm not sure I understand. They're both approved to hold things for consumers, which is already a promise to redeem upon request. Staking feels like the same thing. Is the confusion because ETH itself has not yet been explicitly ruled to be a security?
> This is a valid hypothesis. To the extent it's been tested, the opposite has been (inconclusively) true
Would be an interesting debate but maybe let's not go down that rabbit hole :D
Broker-dealer regulations. Related-party transaction disclosures, audits, et cetera.
> both approved to hold things for consumers, which is already a promise to redeem upon request
What Kraken is and isn't approved to do is uncertain. They have a Wyoming banking license, but it's unclear what that permits with respect to staking and custody.
The actual outcome of this fine isn’t going to be that staking companies and exchanges start registering their products as securities. There’s just way too much regulatory overhead for that to make any sense. The actual outcome is that US customers will access staking through non-US exchanges and decentralized services, where they may face more risk. I think everyone involved in this decision understands that, including the SEC.
There is a line in the bible about "straining out a knat and swallowing a camel" and that is the SEC all over. They refuse to let Kraken register an above board program then shut it down for not registering. But FTX waltzes right though.
Will be interesting to see what impact this has on validators adhering to ofac rules. It's much easier to control blocks when they're processed centrally.
> The SEC’s characterization of Kraken’s staking setup highlighted the “risks” investors take on when staking their tokens with “staking-as-a-service” providers, which give them “very little protection,” a press release said.
Right. The SEC has apparently had it with uninsured, unregulated exchanges. After FTX, tolerance for that sort of thing is over. They want to stop this before somebody dips into customer funds, instead of after.
Kraken claims to be "regulated by FinCen."[1] This is deceptive. FinCen, the Financial Crimes Enforcement Network, is not a regulator of organizations which hold the assets of others. It's the anti-money-laundering coordination center, the "know your customer" part of enforcement. Anybody can file the form to be listed with FinCen; that just says you might need to report transactions in future and want a login. It's nothing like getting a banking or brokerage or exchange license, where auditors check up on what you're doing with the customers' money.
I don't think this is the same as FTX, the issue at hand is that staking is presented as unregulated investments. Functioning as an exchange is still allowed.
I believe Gemini is the one that was already punished for this, and of course Coinbase tried to do this but was stopped on the blocks.
Kraken is a cult pretending to be a company. The ATF should be giving them as much scrutiny as the SEC.
I had an interview with them not too long ago without knowing much about them other than that they were a crypto exchange. An absolutely insane experience.
More that they plan to use them against government and civilians that want to regulate them.
I was told by one of their recruiters they train their employees to use weapons in case they get swatted. Never mind the fact that their "culture" document has a bunch of language about resisting government regulation, never mind the paranoia, but the idea of encouraging employees to own and train with weapons in case the police come knocking is in itself deserving of police attention.
Kraken just agreed with a regulator to change their business practices and pay a fine. It's literally right there in the linked article! They didn't shoot anyone. So, while their corporate culture might be stupid I doubt your claims about using weapons.
That's a pretty serious allegation. You think if the SEC comes by to look at their books, they're going to refuse and use guns to stop them? The leader is certainly full of libertarian foolishness in his comments. It's another step entirely to say they are prepared to resist the police. If that happens that's going to be the end of them, but I don't think that would happen.
I'm out of the loop. Does this affect ETH's new proof-of-stake model? Is the SEC effectively saying, "this is close enough to a pyramid scheme for us to ban"?
This isn't about staking being a problem, it's about 3rd parties staking on behalf of users being a problem. Users aren't being banned from staking for themselves at home on Ethereum or any other networks.
Edit: there's no reason to think that staking is a Ponzi scheme. It doesn't rely on new money coming in to pay previous investors since the protocol creates new assets. Every participant can sell their holdings and systems such as Ethereum's proof of stake will continue to pay the validator.
Can someone translate what the actual problem with that service was? I mean what I can do centrally via kraken I can also do directly via the blockchain.
Calling it "Etherium" to mock blockchain advocates is extremely immature and not appropriate for Hackernews, no matter how deserving of ridicule blockchain advocates are.
Finally SEC is getting its act together. Probably triggered by FTX fiasco. Good to see SEC go after the larger players for a change rather than no name exchanges.
