From mboxrd@z Thu Jan 1 00:00:00 1970 Return-Path: Received: from smtp1.osuosl.org (smtp1.osuosl.org [IPv6:2605:bc80:3010::138]) by lists.linuxfoundation.org (Postfix) with ESMTP id BFA9FC000E for ; Fri, 9 Jul 2021 23:50:57 +0000 (UTC) Received: from localhost (localhost [127.0.0.1]) by smtp1.osuosl.org (Postfix) with ESMTP id 99BAA83DDB for ; Fri, 9 Jul 2021 23:50:57 +0000 (UTC) X-Virus-Scanned: amavisd-new at osuosl.org X-Spam-Flag: NO X-Spam-Score: -1.599 X-Spam-Level: X-Spam-Status: No, score=-1.599 tagged_above=-999 required=5 tests=[BAYES_00=-1.9, DKIM_SIGNED=0.1, DKIM_VALID=-0.1, DKIM_VALID_AU=-0.1, DKIM_VALID_EF=-0.1, FREEMAIL_FROM=0.001, FROM_LOCAL_NOVOWEL=0.5, RCVD_IN_MSPIKE_H3=0.001, RCVD_IN_MSPIKE_WL=0.001, SPF_HELO_PASS=-0.001, SPF_PASS=-0.001] autolearn=ham autolearn_force=no Authentication-Results: smtp1.osuosl.org (amavisd-new); dkim=pass (1024-bit key) header.d=protonmail.com Received: from smtp1.osuosl.org ([127.0.0.1]) by localhost (smtp1.osuosl.org [127.0.0.1]) (amavisd-new, port 10024) with ESMTP id bmkEVwJO2rpT for ; Fri, 9 Jul 2021 23:50:55 +0000 (UTC) X-Greylist: domain auto-whitelisted by SQLgrey-1.8.0 Received: from mail-40137.protonmail.ch (mail-40137.protonmail.ch [185.70.40.137]) by smtp1.osuosl.org (Postfix) with ESMTPS id 16CB283DDA for ; Fri, 9 Jul 2021 23:50:54 +0000 (UTC) Date: Fri, 09 Jul 2021 23:50:45 +0000 DKIM-Signature: v=1; a=rsa-sha256; c=relaxed/relaxed; d=protonmail.com; s=protonmail; t=1625874651; bh=FtXOcRw/+C/1FQFgfv5457tTa4KQbVr+/drSpXgVWZg=; h=Date:To:From:Cc:Reply-To:Subject:In-Reply-To:References:From; b=kcBRLcs6pldkz/3bcgG+CvhH9KCelpg/h7cJ8aQlHK/TbzpLQJ2uRn9jJ6mTutVIk GmowsQ7NWQABsz0y6KzvbVWAhefmpKJxh0TknFNRLJeIaHxIojfJe7n1A3JhviLOUG rSRISJ4dUqgHMukXinZ9CmSvjckC156PsQQIbWqI= To: Eric Voskuil , Bitcoin Protocol Discussion From: ZmnSCPxj Reply-To: ZmnSCPxj Message-ID: In-Reply-To: <00e201d77518$b8ed8e00$2ac8aa00$@voskuil.org> References: <00e201d77518$b8ed8e00$2ac8aa00$@voskuil.org> MIME-Version: 1.0 Content-Type: text/plain; charset=utf-8 Content-Transfer-Encoding: quoted-printable Cc: 'Billy Tetrud' Subject: Re: [bitcoin-dev] Proof of reserves - recording X-BeenThere: bitcoin-dev@lists.linuxfoundation.org X-Mailman-Version: 2.1.15 Precedence: list List-Id: Bitcoin Protocol Discussion List-Unsubscribe: , List-Archive: List-Post: List-Help: List-Subscribe: , X-List-Received-Date: Fri, 09 Jul 2021 23:50:57 -0000 Good morning e, > Any expectation of interest implies borrowing, in other words, a loan= to the bank. Perhaps this is the key point of contention? In cases where Bitcoin is given over to an exchange, there is no expectatio= n of interest, at least in the sense that there is no expectation that the = number of Bitcoins deposited in the exchange *increase* over time. (There may be an expectation of an increase in the number of green-ink hist= orical commemoration papers it can buy, but the point is that the number of= Bitcoins held in behalf of the user is not expected to change) The expectation is that exchanges earn money from the difference between bu= y-price and sell-price, and the money-warehousing service they provide is s= imply provided for free to facilitate their *main* business (i.e. brokers f= or *exchange*). Thus, the expectation is that the exchange provides a warehouse service, no= t a bank service, and this service is provided for free since it enables th= eir *real* business of earning from bid-ask spreads. On the other hand, not your keys not your coins, so anyone who uses such a = warehouse has whatever happens to the funds coming for them... And of course exchanges need not earn money *just* from bid-ask spreads *in= practice*, so they are unlikely to provide proof-of-reserves either. Indeed, money warehousing may very well be provided by means other than pro= of-of-reserves, such as by using multisig the way Green wallet does, with b= etter security. Perhaps "pure exchanges" would be more amenable to such a scheme rather tha= n proof-of-reserves. Regards, ZmnSCPxj > > "Whether saved capital is channeled into investments via stocks or vi= a loans is unimportant. The only difference is in the legal technicalities.= Indeed, even the legal difference between the creditor and the owner is a = negligible one." > > - Rothbard > > > You're using terms in non-standard ways. Putting money into a bank is n= ot considered "lending" to the bank. > > I think it's quite clear that Rothbard considers it lending. I'm not big = on appeal to authority, but sometimes it helps open minds. Links here: > > https://github.com/libbitcoin/libbitcoin-system/wiki/Full-Reserve-Fallacy > > > > money markets have had no reserve requirement and have a nearly spotl= ess record of satisfying their obligations. > > > Lol, money markets are so new that they've had no opportunity to show t= heir true risk. > > 1971, 50 years. > https://en.wikipedia.org/wiki/Money_market_fund > > > In the finance world, things work fine for a long time until they fail = spectacularly, losing more than the gain they made in the first place. This= is a regular occurence. Its the reason bitcoin was created. > > regular occurrence... > > "Buck breaking has rarely happened. Up to the 2008 financial crisis, only= three money funds had broken the buck in the 37-year history of money fund= s... The first money market mutual fund to break the buck was First Multifu= nd for Daily Income (FMDI) in 1978, liquidating and restating NAV at 94 cen= ts per share" > > An investment loss of 6%. > > "The Community Bankers US Government Fund broke the buck in 1994, paying = investors 96 cents per share." > > An investment loss of 4%. > > "This was only the second failure in the then 23-year history of money fu= nds and there were no further failures for 14 years... No further failures = occurred until September 2008, a month that saw tumultuous events for money= funds." > > It was a "tumultuous" month for nearly all investments. The feds of cours= e doled out the pork, and the funds had to take it (as if their competition= did and they didn't they would fail due to higher relative capital costs a= nd thereby lower rates). In the past, absent pork, they had raised money wh= ere necessary to maintain their NAV (just as banks do, but they go to the t= axpayer, and just as all business do from time to time). > > These are remarkably stable in terms of NAV. And people seem to be satisf= ied with them: > > "At the end of 2011, there were 632 money market funds in operation,[19] = with total assets of nearly US$2.7 trillion.[19] Of this $2.7 trillion, ret= ail money market funds had $940 billion in Assets Under Management (AUM). I= nstitutional funds had $1.75 trillion under management.[19]" > > The point being, that this is as close to free market bank-based investin= g as exists in the white market. In a money market fund, the NAV is reflect= ed in the share price, so any losses are evenly distributed - no different = than when all those HODLers take a hit when Elon farts, and the reserve the= y maintain has been very effective in maintaining their $1/share target des= pite paying interest on investments. They are merely shifting market return= s into interest, just like banks. Market returns over short periods aren't = always positive. No surprise. The larger point being, BANKS ARE INVESTMENT = FUNDS. > > > > Irrelevant. > > > It is certainly not irrelevant. People have been lead to believe that t= hey can withdraw their money from their accounts. People expect this. > > Irrelevant, people have minds and free will and can read the contracts th= ey are actually signing. Contracts are theactual Law associated with non-ag= gression. > > > Banks are doing nothing to educate people on the limitations of that fa= ct. > > Again, irrelevant. And wholly unnecessary given compulsory taxpayer depos= it insurance. > > > PoR would give people the ability to see quite accurately how much rese= rves there are and can use this knowledge to put pressure on institutions t= o keep the reserves those people think they should keep. > > For all of the reasons I've stated, it's a fairly pointless exercise, but= people can do what they want. But if they are doing this with a deeply fla= wed understanding of banking to start with, they will be disappointed in th= e outcome. > > > > Without 100% =E2=80=9Creserve=E2=80=9D there is no way to cryptograph= ically demonstrate =E2=80=9Csolvency=E2=80=9D. > > > You can show proof that you're 80% solvent, and then claim the other 20= % is in other assets. This is, again, still useful. > > 80% solvent ... 50% pregnant. > > > > The schemes don=E2=80=99t preclude hacks, insider or otherwise, bankr= uptcy, or state seizure, no matter what the reserve > > > You're right, but that's irrelevant. > > I'll leave that to the reader. The alternative is to use your own wallet. > > > But it seems like you're not interested in understanding what I'm sayin= g or discussing these things honestly. > > I'm not interested in allowing flawed concepts to be perpetuated without = question. This is just a drain on capital that could be put to much better = use. How many times have I heard the oxymoron "full reserve banking", and h= ow much capital has been burned on this futile exercise, simply due to a fa= ilure to understand these concepts. > > > So I'm going to end my conversation with you here. > > While seemingly off-topic, these are things that need to be aired in this= community. Thanks for the discourse. > > e > > On Fri, Jul 9, 2021 at 11:32 AM Eric Voskuil via bitcoin-dev mailto:bitco= in-dev@lists.linuxfoundation.org wrote: > > > On Jul 9, 2021, at 10:44, Billy Tetrud mailto:billy.tetrud@gmail.com wr= ote: > > > > > there is an unsupportable leap being made here > > > > You think that because you're misinterpreting me. I'm in no way claimin= g that any solvent company can prove it, I'm simply claiming that any compa= ny can prove that they have bitcoin reserves to cover bitcoins promised as = account balances. > > You can prove that in your own wallet. All other scenarios imply lending = (which is what is implied by =E2=80=9Creserve=E2=80=9D) and lending cannot = be 100% reserve. > > > > Banks (lending institutions) do not operate under any such pretense > > > > You seem to be saying that banks are under no legal obligation to serve= cash on demand to customers. While you might be right, > > I am, as banks are lending institutions. > > > again you're misinterpreting me. Banks do in fact make claims to their = customers that they'll be able to get cash out of their account on demand. > > Up to the insured limit, in 7 days. This is of course true because the ta= xpayer has insured the bank to that level. > > > They're called demand deposit accounts for a reason. > > They are time deposits, read your bank agreement. Not that it makes any d= ifference. How the contract is satisfied is not a term of the contract, jus= t that it is. And as I pointed out, money markets have had no reserve requi= rement and have a nearly spotless record of satisfying their obligations. > > > And certainly customers expect to be able to withdraw their cash on dem= and. > > Irrelevant. > > > > With a 100% of investment cash hoard, there is zero lending and zero = return > > > > I did say "pretend" did I not? > > See above. > > > > =E2=80=9Crelate to=E2=80=9D is a far cry from 100% =E2=80=9Creserve= =E2=80=9D > > > > Indeed. Again, you seem to be misunderstanding me. You're putting the w= ords "100% reserve" in my mouth, when I never said any such thing. Proof of= 80%/50%/20% reserves is still useful if that's the clear expectation for t= he customer/client. > > Without 100% =E2=80=9Creserve=E2=80=9D there is no way to cryptographical= ly demonstrate =E2=80=9Csolvency=E2=80=9D. And even with that, investors wo= uld have to accept the promise that there are no other liabilities. > > The schemes don=E2=80=99t preclude hacks, insider or otherwise, bankruptc= y, or state seizure, no matter what the reserve. > > It=E2=80=99s information, sure, but it=E2=80=99s not what people seem to = think. If one wants full reserve banking, use a wallet. If one wants to inv= est, the money will be spent - that=E2=80=99s why it was raised. There can = be no covenant placed on it that will ensure it=E2=80=99s return. > > e > > bitcoin-dev mailing list > mailto:bitcoin-dev@lists.linuxfoundation.org > https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev > > bitcoin-dev mailing list > bitcoin-dev@lists.linuxfoundation.org > https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev