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Cryptocurrency has a trust problem

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It’s a world of big promises, big personalities, and big failures that seem puzzling and often ridiculous these days.

But cryptocurrencies are making their way into finance, technology, and even sports. According to Bloomberg Businessweek, it needs to be understood.

This week, the magazine devoted its entire issue to what it calls.The Story of Cryptography: Where It Comes From, What It Means, and Why It Still Matters

Marketplace’s Megan McCarty Carino spoke with Bloomberg opinion columnist Matt Levine, who wrote the article. He said it began as a reaction to traditional banking.

Below is an edited transcript of their conversation.

Matt Levin: The world is complex, and in our daily lives we go about believing that the systems we use will work. And 2008 was the dawn of cryptocurrency, and people lost a lot of trust, not just in banks in particular, but in the system in general. Cryptocurrencies came along as a reaction to that, and the original idea was really that you don’t have to trust anyone. All this is contained in verifiable open source code, and all transactions are published and recorded in an immutable way. The fact that it was checkable meant they were less dependent on trust. But of course, ciphers have gotten bigger and more complex. And if trust crept into this system and you wanted to buy bitcoin, you would probably go to a cryptocurrency exchange because it was easier than doing it yourself. , have come to trust centralized actors in cryptocurrencies.

Megan McCarty Carino: The idea of ​​crypto and blockchain is ‘trustless’, what does that mean?

Levine: Well, it’s not gone, but [but] There are many things in crypto that are not. There are many centralized intermediaries, or lenders and exchanges. And I think one of the effects of the crypto winter and crypto price meltdown earlier this year is that decentralized things worked pretty well. And many who had put their trust in centralized platforms saw that trust abused, with some of those platforms going bankrupt and their customers losing access to their money. , I also think that as long as you’re trying to build a large part of the economy, you’ll need to find some way to have trustworthy intermediaries.

McCarty Carino: Yes, you describe this moment as crypto winter. The market has thus crashed and scams and scams are on the rise. So, as long as trust is a component of these systems, how hard has it hit?

Levine: It’s a pretty big one, but some companies and people survive better than others. And one of the notable things in the aftermath of this is that some of the larger survivors are clearly very invested in not losing all confidence in crypto. There are people like Sam Bankman-Fried who runs the exchange FTX, a currency exchange. He has bought or backed several of the failed lending platforms because if one crypto platform’s customers lose money in a bad way, it will lead to distrust of the entire system. has not intervened to rescue the crypto platform of But there are a few “do it yourself” situations where you don’t want to crash the whole system. So there is a sense of ‘I have to give the money back and regain the trust’.

McCarty Carino: The prospect of government regulation was mentioned. But wouldn’t government regulation go against the whole spirit of cryptocurrencies, so can we really restore trust in these systems?

Levine: Yes Yes. And if you just look at the history of US stock investing, I think you can tell a similar story, the 1920s was just a boom period followed by a big crash. Securities regulation was then built from scratch. And because people trusted the market, they had more confidence in the market for the long term and were able to raise more money. But to your point that it’s people’s aversion to crypto, it’s absolutely true. There are a lot of people, and besides that there are a lot of hedge fund managers who are like, “I want to make money.” We want to attract institutional investment.” And the way to do that is to be absolutely regulated. Both of these stocks are real and legitimate in the crypto world.

McCarty Carino: After this extensive article and all the research, do you think you trust cryptocurrencies?

Levine: I don’t know that I trust crypto. I mean, I guess it’s about the time I put my 401(k) into crypto — I’m a traditional person, right? I see its charm to some extent. And I don’t believe that everything you do in your financial life has to be completely reliable, right? I really want it back. And I want to invest some of my money in risky stocks and make a lot of money. lose money. As you know there is a problem with cryptocurrencies where people offer very high returns and give the impression that it’s just a bank account and your money is safe and a lot of them do very well However, I think that many people in virtual currency think, “This is fun gambling.”

If you want a better understanding of crypto, blockchain, and more, Matt Levine’s story is the one that goes into more detail than anywhere else.

40,000 words in 4 chapters.Bloomberg has labeled it “The Only Cipher Talk You’ll Ever Need” However, just in case it gets more cryptic than it needs to be, it’s kindly categorized as follows: 10 max points cheat sheet.

But in addition to being about 39,000 fewer words, the digest version lacks all the fun graphics, GIFs, and memes of the original.

And what is a crypto story without GIFs and memes?

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