> I've tried reading a few "yellow papers" for crypto projects and they are so abstract and full of jargon that I never come away knowing more than when I started reading.

In some cases, this is by design. The project is nonsensical and/or a scam, and the white paper is an obfuscatory smokescreen to provide an illusion of sophistication.

I feel like this describes so much of the tech industry.

A lot of what we do might be sophisticated in some far corners, but at the end of the day the end results can be trivially explained.

"Taxi ordered from a phone app, "Sleep in other people's homes", "Restaurant delivery service with GPS tracking", "Exercise bike with a screen showing workout videos", "Someone else shops for you", etc.

Unfortunately with crypto, a lot of it is trivially explained as "obfuscated scam"

> "Taxi ordered from a phone app, "Sleep in other people's homes", "Restaurant delivery service with GPS tracking", "Exercise bike with a screen showing workout videos", "Someone else shops for you", etc.

I don't think anyone ever claimed these were complicated or sophisticated, though? They're straightforward user-facing apps. A more comparable example might be cloud services or a good chunk of security products.

"crypto" is a very wide word, there are a lot of technologies participating in the game, and a lot of technical details in them. Most are completely irrelevant to most regular people.

Blockchain is pretty simple. There's a database, organized in a way that you can add records to it but you can not edit past records - or if you try to, everybody would know you did. There's a network of people maintaining this shared database, as a payment ledger - basically, this database for them says "X has $Y amount of database-money". People participating in maintaining this database get paid in the same database-money. They have incentive to do it properly, otherwise their database-money aren't worth shit. They also have incentive to steal if they could, but since they can't edit the database without other people noticing (who aren't interested in having db-money stolen from them) it's hard. That's the basic level of cryptocurrency systems, very shallowly and simplified, of course. If you want to know the math and protocols, there are full college degree programs dedicated to it (I am not kidding at all, there are). There's even free courses on Coursera and such which deal with the basics.

The second level is allowing to do other, more complicated stuff with the same database. Like keep ownership records for other things (that's basically NFT). The next level is turning it from passive database into a computation engine, so you can make computations that will be reproducible over the database. That's ethereum contracts and such. There also side aspects - like privacy chains, where the information who owns the money is encrypted, so you can prove you own the money but somebody else would have hard time seeing how much you got and where it came from (it's usually very easy in most chains). Etc. etc.

Whether it's revolutionary or overhyped - I have no idea. That's kinda societal question, certainly all the above (and more) can be useful and you can build useful stuff on top of it. Would some people use it? Probably. Will everybody switch to it from existing ways of doing things? I have no idea, but I suspect no. But I am nobody, so it's worth nothing. A lot of people smarter than me thought there's a use case for certain things, and spend a lot of time and money building stuff, and nobody every used it. Take Meta - the whole "metaverse" thing, nobody even remembers it now. There are many things like that. Is crypto one of them? I dunno. We'll see.

To be fair, a lot of people don't understand the old money system either

In fact, there's probably less people who understand the old money system than those that understand the crypto math. After all, the latter can be readily learned from books and whitepapers, go figure where do you learn how actually the real monetary system works, in all its complexity, and how would you even get such level of access without being member of the Fed board.

Founding banks, working in banking back office infra (central bank connectivity etc.); there are for sure places where you can get this knowledge. Also there dedicated central banking degrees in lot of countries.

Founding banks has essentially become impossible in Germany and more and more financial services have been moved under the umbrella of the banking license.

It's very disturbing to me that the possibility of grass roots reform is essentially gone. You need a a two digit million amount of equity, proof of both formal academic and real life experience, you need a large team of trained professionals, easily at least 10 core employees who essentially aren't allowed to know anything other than banking and worst of all, you must keep these employees employed for the duration of the application, which may take a year or two and even if you did all of that, you can still get rejected anyway. Oh, and by the way, you're not allowed to earn money (as a bank) before you get your banking license, meaning that you are burning money faster than any other potential startup.

Now you might think this is fair, after all, banking is a high trust business that requires an extreme amount of caution and care or things will go to shit. Except as I already mentioned: More and more things are moving under the banking license umbrella, but applying to a subset of a banking license doesn't lower costs. The costs are the same no matter what you actually do, which favors massive banks that only have to pay for the license once and use their banking license to the fullest to provide all the services permitted by their license, which ironically increases the systemic risk by letting them become a point of single failure since all the services that ought to be separated are now combined in a single entity to minimize regulatory cost.

Most bailouts are the logical consequence of co-mingling the deposit service with the investment banking services in the same bank. The problem here isn't that losses in investment banking causes loss of deposits. It's that if the bank makes a financial loss in one department, it will also have to shut down the other department as well, because they are under the same company. The opposite is also true. If the payment services run at a loss, the bank will feel compelled to try risky investment banking bets to even the losses out. This type of cross subsidy essentially guarantees that the government will have to bail the bank out.

Source: I did that in the last 5y so I know what I'm talking about :)

edit: An the process what you describe as complex etc., is actually good and robust

Central banks publish reports on how money works. It's the economists teaching students at universities who refuse to read them. (looking at you Gregory Mankiw)

Yes. Because no one has ever written any readily available books and white papers on old money.

Tons of books, of course. But if a person reads a good book on, say, Bitcoin chain foundations, I am pretty sure they'd understand how it works. If you read 20 financial books, I am not sure you'd understand how something like US money system really works.

I'm 2/3 of the way through a degree in business admin with a minor in economics at a provincial university in Canada and I'd say I have a decent layman's understanding of the international monetary system.

The place I'd look if I wanted a deeper understanding of how the fed operates would be reading the laws that govern banking.

> But if a person reads a good book on, say, Bitcoin chain foundations, I am pretty sure they'd understand how it works.

On technological level? Yes. On the bullshit scam level with sixteen layers of new invented terminology? Most likely not.

And yes, cryptoworld is easier to understand precisely because it's unbelievably primitive once you pull apart hype, scams, and layers of indirection.

Edit: oh, it's also busy re-inventing most of the concepts that the world has had for centuries, and most people understand without needing to read books and whitepapers

To steelman the crypto side: I think the stuff that is most interesting is found _around_ crypto and not necessarily within most cryptocurrency projects.

For example, there have been a lot of novel or interesting projects centered around cryptography, consensus, decentralization, anonyimity. On a sociological level, there are a lot of interesting social/economic experiments unfolding in the DeFi world as we speak.

But I think that is where the truly interesting or valuable contributions to humanity as a whole end, and the vast, vast majority of it otherwise is just speculation or scams. It is hard to find that signal in the noise, but it is there, if you look.

I had a great time using drugs friends bought on the silk road back in the day and I'd say that particular economic activity being facilitated by crypto while completely hedonistic was a net positive for humanity.

Try asking an LLM about it. They're good for that kind of introduction, because they can respond appropriately to your level of knowledge. Just ask it to provide references so you can verify what it's saying. But in general, hallucinations aren't a big issue with those kinds of prompts.

It's a revolutionary technology for the trustless, public exchange of data. It's overhyped as a financial instrument. Anybody who desires a completely public, completely trustless infrastructure for money or property is stupid.

It helped me to start from the problem it tries to solve.

Fundamentally, we've been making digital versions of everything. We have digital phone calls, television, bookkeeping, document writing, drawing, etc.

One thing we didn't have digitally was a currency.

Why would we want a digital currency? For similar reasons to all the other stuff above. It's more convenient. When you "transfer money" from your bank account to another, your bank has to physically move the associated cash from it's vault to the other banks vault, by hiring secure trucks, people, and so on. If the money has to cross a border, that's even more of a hassle, now you have to physically cross a border with a truck full of cash. When a bank "holds onto your money", they need a big vault full of cash, they have to count it, account for every dollar, physically safeguard it, etc.

This is a huge cost, inefficiency, and a big challenge of banking, and it's one reason transaction fees and banking fees are so high.

Now we have an idea of why we might want to make a digital currency. The biggest issue with making one is how do you solve the "double spend problem". That is, if I have 1 unit of a currency and I give it to you, how do we guarantee I no longer have that unit after it was given to you? In a physical world, I'm giving you the actual unit of currency, but in the digital world I'm giving you a copy of it, it would be easy for me to keep my copy as well and have an infinite money glitch.

The solution to that is simple, you have a source of truth that processes the transaction. That source of truth records that I had 10$ and you had 10$, I gave you 1$, and now I have 9$ and you have 11$.

That's easy enough. Here comes the second problem, who would trust owning that source of truth? Would you trust me keeping the official source of truth log of how much money everyone has? I could easily add myself a few 0s to my account, or remove some from yours.

Would you trust the government of your country? Of another country? A big corporation? A US charity?

This is where crypto comes in. Crypto says, nobody would ever trust a single entity, but what if everyone could join a network of nodes that together form the source of truth? Not owned by any single person, but the union of everyone who wants to join the network, and you could join the network, I could join it, anyone is free to join it, and we can all validate and check each other's work to make sure no one else on the network is fudging the numbers.

And now a lot of complex cryptographic math comes in to from this network.

> When you "transfer money" from your bank account to another, your bank has to physically move the associated cash from it's vault to the other banks vault, by hiring secure trucks, people, and so on

That's several centuries out of date, I'm afraid. Even before computers banks didn't actually do that, but now they certainly never do that. They just change records in their books - it has been paper books once, now it's just database files. I mean, banks do move cash (still do) but not when you transfer money from account to account, it has nothing to do with that, unless when you're running a massive cash-based business (which most banks hate btw, for many reasons).

thanks for clarifying, I'm still laughing my ass of because the sentence you quoted :-D

> Why would we want a digital currency? For similar reasons to all the other stuff above. It's more convenient. When you "transfer money" from your bank account to another, your bank has to physically move the associated cash from it's vault to the other banks vault, by hiring secure trucks, people, and so on. If the money has to cross a border, that's even more of a hassle, now you have to physically cross a border with a truck full of cash. When a bank "holds onto your money", they need a big vault full of cash, they have to count it, account for every dollar, physically safeguard it, etc.

>

> This is a huge cost, inefficiency, and a big challenge of banking, and it's one reason transaction fees and banking fees are so high.

That's absolutely not how this works though. Banks perform electronic transfers and most of the money is accounted for in databases. The problems are slow, antiquated, technology, which is made worse by the amount of regulation surrounding it that makes it hard for new contenders to enter and drive down prices via competition.

Cryptocurrency is trustless, but there is an interesting tangent about if you _do not_ want a government to control monetary policy.

GP: this describes the whole crypto world so well I can almost taste it.

Someone completely misunderstands how the real world works, misrepresents that even more when trying to articulate, uses convoluted wording to hide their total lack of understanding of the real world. Then create a "solution" for the problems that do not exist in the real world in the first place, in the process reinventing problems that are solved for centuries already or running head first into ideas that have been proven multiple times in history to just not work.

This whole machinery is then used by criminals to launder money, scammers to scam people out of money and speculants hoping to get rich quick, providing real money liquidity for the previous two.

"When you "transfer money" from your bank account to another, your bank has to physically move the associated cash from it's vault to the other banks vault, by hiring secure trucks, people, and so on."

Payment settlement is a solved problem and very rarely involves physical cash transfer. Most of this is just numbers moved between accounts which commercial banks have with a central bank.

> When you "transfer money" from your bank account to another, your bank has to physically move the associated cash from it's vault to the other banks vault, by hiring secure trucks, people, and so on.

That hasn't been true for, uh, centuries. It's like literally the entire point of banking, to allow financial transactions to take place without having to physically haul around collateral anywhere.

(And if you want a digital version of what banks actually do, it's called SWIFT, and has been around since checks Wikipedia 1973).

Yes and for people who think “centuries” is an exaggeration, the knights templar gained their power and wealth in the middle ages specifically because people could use their promissory notes to exchange for cash so that they didn’t have to physically transport valuables around between Europe and the middle East during the time of the crusades. They allowed people to deposit cash at temple church in London and withdraw it in Jerusalem.

See https://www.bbc.com/news/business-38499883 and elsewhere.

It’s really telling how poor the knowledge of financial history and the existing state of the art in traditional financial tech there is among people in the crypto-boosting space. Many of the “innovations” they claim have been around in traditional finance for hundreds of years.

Hawala is the same principle and existed pretty much since the same times, maybe earlier (nobody really knows when it started). Still exists and causes major headaches to people like FATF.

knights templar mentioned in a thread about fintechs and banking. Nice.

They were the fintech of their times, so perhaps it’d be more surprising if they weren’t.

> When you "transfer money" from your bank account to another, your bank has to physically move the associated cash from it's vault to the other banks vault, by hiring secure trucks, people, and so on. If the money has to cross a border, that's even more of a hassle, now you have to physically cross a border with a truck full of cash. When a bank "holds onto your money", they need a big vault full of cash, they have to count it, account for every dollar, physically safeguard it, etc.

While I'm sure some of this is true for some banks at some point in history, this is the kind of understanding of a given industry that results in TechBros reinventing buses or juicing machines.

> This is a huge cost, inefficiency, and a big challenge of banking, and it's one reason transaction fees and banking fees are so high.

The reason banking fees are so high is because they charge what the market will bear, and most of the banks customers are a captive audience. It doesn't cost $2 to perform a transaction at an ATM; it costs pennies, if that. Banks should be paying you for holding, and putting to use, your money.

> When you "transfer money" from your bank account to another, your bank has to physically move the associated cash from it's vault to the other banks vault, by hiring secure trucks, people, and so on.

That’s not at all what happens!

Transfers are done digitally, physical cash does not move between vaults or bank branches.

I remember being shocked at some point that my deposits at a bank would actually be a liability on their books not an asset. When you think about it as passing around debt, it makes a bit more sense.

The easier explanation is that your deposits are yours, not the bank’s. In terms of debt, they owe you. They make money by borrowing from you and lending long term debt to get more yield than they pay you on your cash (you may hear this called “borrow short to lend long”).

Since the invention of the computer, sure, but before that, yes they did at some point reconcile. Even today, cash still physically moves from the mint to banks to consumers.

In the US, fewer than 18% of consumer transactions are made with cash, and it is declining.

The article you're commenting on will tell you everything you need to know.

The article I'm commenting on is pretty clearly heavily biased against the entire field, possibly for good reason. I'd like to get my foundational understanding from a more neutral source so I can better consider the arguments put forth in TFA.

Mastering Bitcoin by Andreas A. is the best book you can read on the subject.