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Author Topic: [2018-09-13]10 Years After Lehman: Bitcoin and Wall Street Are Closer Than Ever  (Read 106 times)
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September 13, 2018, 06:33:13 AM
 #1

Hank Paulson, former secretary of the U.S. Treasury, called it "an economic 9/11."

Having loaded up on mortgage debt that went sour, then failed to find a savior in the government or private sector, the 158-year-old Wall Street investment bank Lehman Brothers filed for bankruptcy on Sept. 15, 2008.

The fallout over the following days, weeks and months would threaten to topple the entire financial system, necessitating trillions of dollars in rescue lending to banks and other firms by governments and central banks. The global financial system hadn't looked more fragile at any point since 1929.

Worse, support for the system was undermined by the fact that Wall Street executives still collected multimillion-dollar bonuses – even as millions of the taxpayers, who helped fund those bonuses, lost their homes.

Within a couple of months of Lehman's bankruptcy, though, a new piece of technology would debut – almost unnoticed – one that appeared to offer an alternative to this catastrophe-prone system. On October 31, 2008, an unidentified individual going by the name Satoshi Nakamoto published the bitcoin white paper to a cryptography mailing list.

The paper described "a purely peer-to-peer version of electronic cash [that] would allow online payments to be sent directly from one party to another without going through a financial institution."

Satoshi had almost certainly been working on the protocol for months or years prior to Lehman's collapse but, according to Cornell computer science professor and blockchain researcher Emin Gun Sirer, there was a timely motive to the launch.

Sirer told CoinDesk:

"It's very clear that Satoshi was affected by the events that led up to the financial crisis of 2008, and then it's obviously recorded in the genesis block as well."

Sirer is referring to the Times of London headline bitcoin's creator pointedly inserted into the first bitcoin block ever mined, on Jan. 3, 2009: "Chancellor on brink of second bailout for banks."

As awareness of bitcoin spread, different people saw different things in it, but for many, it represented an alternative to fiat currency issued by central banks (which had just fired up the proverbial printing presses again) and the fractional reserve banking system (which had nearly collapsed beneath a mountain of lending).

Most of all, it promised to bypass the financial institutions the crisis had cast such doubt on.

Laszlo Hanyecz, known as "Bitcoin Pizza Guy" for becoming the first person to use the cryptocurrency to purchase real-world goods (two pizzas for 10,000 BTC in May 2010), told CoinDesk that he believed bitcoin could replace "the established system of banks and the endless line of middlemen all taking a cut."

Yet over the past decade, the worlds of bitcoin – and its cryptocurrency and blockchain offshoots – and traditional finance have begun to interact in ways almost no one would have predicted early on.

Wall Street veterans are decamping to work for firms focused on cryptocurrency. Major financial institutions are flirting with blockchain. And cryptocurrency investors are pushing for the creation of investment vehicles by industry incumbents.

Ten years after bitcoin was born into the flames of the financial crisis, have the cryptocurrency community and Wall Street made nice?

Bitcoin versus the world?
Early on, the ethos around bitcoin was undeniably subversive.

One early adopter and miner, who asked to remain anonymous, told CoinDesk that "in the very beginning" there was "a great deal of discussion about the anarcho-capitalist and/or libertarian ideals" that bitcoin appeared to make possible.

He mentioned dark web markets such as Silk Road, which used bitcoin, but noted that these rested on a misunderstanding of the protocol's limited anonymity.

Even ignoring its illicit use cases, though, the creation of decentralized money appeared to pose a threat to the established order. It provided, the early adopter said, an escape from "the interpersonal and cultural damage and destruction done by the monetary monopolies" – meaning banks and governments.

Taariq Lewis, a long-time cryptocurrency developer whose most recent project is codenamed Lyra Protocols, agreed that "bitcoin was always meant to bypass the financial system."

As such, some early bitcoiners worried that participating in such a project could be dangerous.

Stefan Thomas, who discovered bitcoin through the random-browsing site StumbleUpon in 2010, and then went on to work as Ripple's CTO before starting his own venture, told CoinDesk:

"A lot of people early on in the bitcoin community were very worried that central banks would look at this as a fundamental threat to one of the key, key, pillars of power of the government, which is the ability to issue currency. And so a lot of people early on stayed anonymous, they did not reveal their real identities."

As it turns out, he said, most of the supposed central bank "illuminati" were simply curious about the new technology.

Although, that's not to say that mavens of established finance haven't lashed out on occasion. Jamie Dimon, JPMorgan's CEO since before the crisis, has called bitcoin a "fraud," though he's since walked that statement back. And Warren Buffett, the billionaire investor who bailed Goldman Sachs out in the week following Lehman's bankruptcy, has called bitcoin "rat poison squared."

To be sure, for all the hope it's inspired (and acrimony it's generated), bitcoin is far from toppling the incumbent financial system.

Wall Street banks – most of them – not only survived the crisis, but have grown bigger than they ever were before it. Central banks and fiat money show no signs of going anywhere, and bitcoin remains a tiny sliver of the global monetary system.

"It's turned out," said Sirer, "that undoing the Fed and replacing money as we know it is actually a tall order, and it has to happen in stages if it's going to happen at all."

In the meantime, he added, "There's a lot to be had from playing nice with the existing system and making it better."


read more:https://www.coindesk.com/10-years-after-lehman-bitcoin-and-wall-street-are-closer-than-ever/
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September 13, 2018, 12:45:47 PM
 #2

The only way fiat is going to die is when the population will lose faith in it and the government will fail. Even hyperinflation like the one currently happening in Venezuela is not enough to kill fiat, many other countries have had it at some point of their history, and they've usually solved it by rebooting their currency. Too many people are dependent on it - people employed by the government, people who pay taxes and so on. I don't believe in Bitcoin revolution, Bitcoin will just keep coexisting with fiat and will have a relatively small userbase consisting of people who value its properties.

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September 13, 2018, 02:02:36 PM
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I don't believe in Bitcoin revolution, Bitcoin will just keep coexisting with fiat and will have a relatively small userbase consisting of people who value its properties.

The Bitcoin revolution started at the moment the network went live.

In the end, we should be happy that we won't ever come to a point at which the mass (as in hundreds of millions of users) drop their weight on Bitcoin. Fiat's coexistence makes sure that people have the ability to choose which currency works the best for them, and in some cases that's Bitcoin, and in other cases fiat.

Bitcoin's main selling feature is being decentralized, but that's also it's main weakness when it comes to mass adoption. Let the mass use Bitcoin strictly as store of value and use fiat as money, and the rest will happily utilize Bitcoin as money through LN. I think that's a fair enough balance allowing Bitcoin to remain the decentralized safe haven for as long as realistically possible.

That was the most realistic side of the story.

The less realistic side of the story, but most preferable outcome, is that satoshis become units of value on their own. Gold had that status at a given point, and Bitcoin might gain that what Gold lost back then. I know most people can't even imagine Bitcoin reaching that state, but we have enough historical evidence that Bitcoin has always been underestimated and has done that what the many didn't expect to happen. I'm quite optimistic yet realistic.

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September 13, 2018, 03:51:56 PM
 #4

"that undoing the Fed and replacing money as we know it is actually a tall order, and it has to happen in stages if it's going to happen at all."

This will echo into eternity, because most people are clueless about the control that governments have over currencies and

how they are helping to protect financial institutions, like Goldman Sachs. Financial privacy and control should not become

an issue, once it is taken away... it should be a continuous battle to prevent it from happening.  Angry  The financial world has

changed after 911 and the near economic collapse, but one thing should never change... Financial freedom is a RIGHT, not

a privilege.  Wink

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September 13, 2018, 05:58:14 PM
 #5

The only way fiat is going to die is when the population will lose faith in it and the government will fail. Even hyperinflation like the one currently happening in Venezuela is not enough to kill fiat, many other countries have had it at some point of their history, and they've usually solved it by rebooting their currency. Too many people are dependent on it - people employed by the government, people who pay taxes and so on. I don't believe in Bitcoin revolution, Bitcoin will just keep coexisting with fiat and will have a relatively small userbase consisting of people who value its properties.

I'm also quite skeptical that Bitcoin is going replace fiat currencies, unless people abolish governments entirely. Governments have no incentive to give up monetary control, and they will continue forcing people to accept legal tender for payment of debts and taxes. Most people are passive sheep and will do what government and society tells them to do.

The path I see is one where BTC gains status as a traditional investment asset. Governments and central banks will be forced to hold reserves as a hedge against geopolitical risk, but it would be nonsensical for them to cede monetary control and adopt BTC as legal tender. I'm not sure about mass adoption for commerce, not until we see user-friendly applications that allow for exponential scale. Then we'll see what actual adoption looks like.

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September 17, 2018, 11:29:25 AM
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We can definitely see that bitcoin have seen extremely high amounts of corporate and institutional interest over the past few years, especially sparked by last year's bull market.

However, I don't think that it's right to say that they are working together per se. These investment firms generally use bitcoin as some sort of speculative tool or even endorse centralized crypto projects that have no relation to bitcoin whatsoever. They are not actually involved in most cases with the actual use and adoption of the network, or even trading actual bitcoins, as opposed to futures, and derivatives.

The chances of bitcoin replacing fiat outright is extremely slim in the next few decades, considering that governments around the world aren't going to go anywhere most likely. At the least though I do expect bitcoin to be a accepted means of payment as an alternative to fiat worldwide, running sort of in parallel with the fiat system, with users using it to store their wealth away from an ever depreciating national fiat.

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September 17, 2018, 12:19:47 PM
 #7

The banking industry has still haven't learned a lesson from the 2008 crisis. As of today the market is still full of weakness and to be honest I won't be surprised if another one comes soon. The same outrageous subprimes, the same toxic loans contracts targeting the institutions taking profits of their lack of knowledge. Mind you, if the same crisis comes from Europe the things will be worst. Take a look at the Deutch Bank, if the same crisis starts from them, not only the whole Europe economy will be damaged but the worldwide economy will fail. Why? The DB is a lot bigger than Lahman

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September 17, 2018, 01:18:18 PM
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The only way fiat is going to die is when the population will lose faith in it and the government will fail. Even hyperinflation like the one currently happening in Venezuela is not enough to kill fiat, many other countries have had it at some point of their history, and they've usually solved it by rebooting their currency. Too many people are dependent on it - people employed by the government, people who pay taxes and so on. I don't believe in Bitcoin revolution, Bitcoin will just keep coexisting with fiat and will have a relatively small userbase consisting of people who value its properties.

I'm also quite skeptical that Bitcoin is going replace fiat currencies, unless people abolish governments entirely. Governments have no incentive to give up monetary control, and they will continue forcing people to accept legal tender for payment of debts and taxes. Most people are passive sheep and will do what government and society tells them to do.

The path I see is one where BTC gains status as a traditional investment asset. Governments and central banks will be forced to hold reserves as a hedge against geopolitical risk, but it would be nonsensical for them to cede monetary control and adopt BTC as legal tender. I'm not sure about mass adoption for commerce, not until we see user-friendly applications that allow for exponential scale. Then we'll see what actual adoption looks like.

If governments will continue with their anti-cash policies, Bitcoin is very likely to become cash 2.0 - a payment method of choice for people who currently have some sort of cash-only business. People will start using Bitcoin as currency more when they'll realize that it's one of the best ways for them. It might not be now, or maybe people just don't think about it too much, but it's very likely to change in the future, although I don't expect it to be too massive.

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September 17, 2018, 04:05:07 PM
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The only way fiat is going to die is when the population will lose faith in it and the government will fail. Even hyperinflation like the one currently happening in Venezuela is not enough to kill fiat, many other countries have had it at some point of their history, and they've usually solved it by rebooting their currency. Too many people are dependent on it - people employed by the government, people who pay taxes and so on. I don't believe in Bitcoin revolution, Bitcoin will just keep coexisting with fiat and will have a relatively small userbase consisting of people who value its properties.

People don't lose faith in fiat, because the government uses its muscle to ensure that they continue using it. Long before Bitcoin, there have been ways for people to stop using fiat - they could have used gold instead. But even in countries with hyperinflation, the government machinery has ensured that fiat continues to be used.


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September 17, 2018, 07:37:50 PM
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The only way fiat is going to die is when the population will lose faith in it and the government will fail. Even hyperinflation like the one currently happening in Venezuela is not enough to kill fiat, many other countries have had it at some point of their history, and they've usually solved it by rebooting their currency. Too many people are dependent on it - people employed by the government, people who pay taxes and so on. I don't believe in Bitcoin revolution, Bitcoin will just keep coexisting with fiat and will have a relatively small userbase consisting of people who value its properties.

People don't lose faith in fiat, because the government uses its muscle to ensure that they continue using it. Long before Bitcoin, there have been ways for people to stop using fiat - they could have used gold instead. But even in countries with hyperinflation, the government machinery has ensured that fiat continues to be used.

It depends on the country though. In a strong economy like the US you're right that it would take a huge shift for people to lose faith in fiat but in struggling economies it already has happened. I've been to countries that you go into a public market and the vendors don't even take the local currency anymore they take USD. In those types of places people are already losing faith in fiat and will come to embrace cryptocurrency.

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September 17, 2018, 11:25:56 PM
 #11

The government will never allow bitcoin to replace the fiat, or they will lose all their power of manipulation of the financial system. As long as they continue to manipulate the financial system with central banks, the crisis will come in periodically, bigger and bigger, not sure how it will end.

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September 18, 2018, 12:40:27 AM
 #12

People don't lose faith in fiat, because the government uses its muscle to ensure that they continue using it. Long before Bitcoin, there have been ways for people to stop using fiat - they could have used gold instead. But even in countries with hyperinflation, the government machinery has ensured that fiat continues to be used.
Fiat has no equal at this point in terms of usability and relative stability. I see no reason for anyone in a stable country to use crypto over fiat, and I don't see it change in the foreseeable future.

Those in unstable countries will obviously need an alternative, but I'm not sure if crypto is that helpful to them. I have been to South America a couple of years ago, and most local stores were literally begging me to pay in USD.

The currency that people here dislike the most is offering more usefulness than crypto at this point. Crypto enthusiasts can disagree with this all they want, but there is no other way to put it.

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September 23, 2018, 07:37:00 AM
 #13

The government will never allow bitcoin to replace the fiat, or they will lose all their power of manipulation of the financial system. As long as they continue to manipulate the financial system with central banks, the crisis will come in periodically, bigger and bigger, not sure how it will end.

Of course no government will really allow bitcoin to take over their country. It will change the status quo, banking system has been with us for hundreds of year so they won't simply accept it. The sooner that crypto enthusiast accept this fact the better.

That Lehman fall-out in 2008 was really a eye opener because it has affected me a lot. I even opened a thread about it here: (https://bitcointalk.org/index.php?topic=5028744.0).

We could see though that crypto can be used a leverage for such disaster. If crypto have been in existence that time, I sure that everyone would be happy to move their fiat to crypto to take advantage of its store of value. But to totally say that crypto is going to replace fiat, it won't happen.

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