Return-Path: Received: from smtp4.osuosl.org (smtp4.osuosl.org [140.211.166.137]) by lists.linuxfoundation.org (Postfix) with ESMTP id 5EB02C000E for ; Fri, 9 Jul 2021 23:18:29 +0000 (UTC) Received: from localhost (localhost [127.0.0.1]) by smtp4.osuosl.org (Postfix) with ESMTP id 4D83A423D1 for ; Fri, 9 Jul 2021 23:18:29 +0000 (UTC) X-Virus-Scanned: amavisd-new at osuosl.org X-Spam-Flag: NO X-Spam-Score: -1.9 X-Spam-Level: X-Spam-Status: No, score=-1.9 tagged_above=-999 required=5 tests=[BAYES_00=-1.9, DKIM_SIGNED=0.1, DKIM_VALID=-0.1, RCVD_IN_DNSWL_NONE=-0.0001] autolearn=ham autolearn_force=no Authentication-Results: smtp4.osuosl.org (amavisd-new); dkim=pass (2048-bit key) header.d=voskuil-org.20150623.gappssmtp.com Received: from smtp4.osuosl.org ([127.0.0.1]) by localhost (smtp4.osuosl.org [127.0.0.1]) (amavisd-new, port 10024) with ESMTP id jm2-Jt5gfNOK for ; Fri, 9 Jul 2021 23:18:27 +0000 (UTC) X-Greylist: whitelisted by SQLgrey-1.8.0 Received: from mail-pf1-x435.google.com (mail-pf1-x435.google.com [IPv6:2607:f8b0:4864:20::435]) by smtp4.osuosl.org (Postfix) with ESMTPS id D044C423CA for ; Fri, 9 Jul 2021 23:18:27 +0000 (UTC) Received: by mail-pf1-x435.google.com with SMTP id o201so5076191pfd.1 for ; Fri, 09 Jul 2021 16:18:27 -0700 (PDT) DKIM-Signature: v=1; a=rsa-sha256; c=relaxed/relaxed; d=voskuil-org.20150623.gappssmtp.com; s=20150623; h=from:to:cc:references:in-reply-to:subject:date:message-id :mime-version:content-transfer-encoding:thread-index :content-language; bh=uWUlEK8QXejEXyYRLokv1M54SN+k1HXhkijn9sPV5Xs=; b=Lnm+B4uZb7fTzt/js6FPLL80ESkgYLu1cNyRJHuIZhHip4D3UVTXz8uxwp6XrAPXf6 i1e7iaQF4RR5v3sPCpjPlGd6jffUNtK+3+zteM50UjidzbdfpSRx6yVHyhM8q01KBi2b 1kgFgSe5EYhbFjizFPBzE2wkxxZf08pU8afx/eONzbf8tAOhjl5k4sMFhNCIWzF2auaz 2KKF5L/MulGiiJm+oedaNYI3yAOZJqBwrRccMbGbugJh3MUIDUV8l6bINdpnTg+D+btW qb2sF6nQ3B+3aNkQ/eB3L/WtsueRo9IwcCTPbgPbegZOYir2GWFXZJZG/pja2Pk8ahBx muXA== X-Google-DKIM-Signature: v=1; a=rsa-sha256; c=relaxed/relaxed; d=1e100.net; s=20161025; h=x-gm-message-state:from:to:cc:references:in-reply-to:subject:date :message-id:mime-version:content-transfer-encoding:thread-index :content-language; bh=uWUlEK8QXejEXyYRLokv1M54SN+k1HXhkijn9sPV5Xs=; b=askL5bFCVLvpiXLXE3UlaFi8oA+JjqK78CLsnvQnO8aTXCTA3KkCL9GANVtMHw39YG T6UYrcBs0ANUXNDc5Ouiqfu3bXgzHGTCpzggM/+82yy9uLzwc3qT3aHlaqMgsLVvaVp2 ZFbE8Q711tFcgoP2gBR+PmXYUIkVqmJTvR75xnY85zk+3kmLDQqRv2Bs3a53D5L5vv+3 dmNEyBi2zEBK7CwlvGTVT9SESCbPlgOKsval/PaxHKegcb1bQdnVVURoL+MmWM4Ssz1F d0ChmIX6XgDucXXdlKaaYhJchudCSLDnFgR1qsbvGTduT+D67uQAGVx/5XvyPtPqra0j e+Qw== X-Gm-Message-State: AOAM531DxHjguO9riVFjJmNBZPAVTnIR6HjLkUBD5Ejdyo3SYuvwMSig PFzyMH5/TZd8XlSe0ZXmsh245Q== X-Google-Smtp-Source: ABdhPJxOtTyGOUlq1vtLQNd4LiPONV2JNu5Hjv68pGk7IG8orALhFOJ+lZvrlp75nH25OUfqUbMVow== X-Received: by 2002:a63:d648:: with SMTP id d8mr34169733pgj.280.1625872707022; Fri, 09 Jul 2021 16:18:27 -0700 (PDT) Received: from ERICDESKTOP ([2601:600:9c00:1d0::cccf]) by smtp.gmail.com with ESMTPSA id t13sm6665210pjq.14.2021.07.09.16.18.26 (version=TLS1_2 cipher=ECDHE-ECDSA-AES128-GCM-SHA256 bits=128/128); Fri, 09 Jul 2021 16:18:26 -0700 (PDT) From: "Eric Voskuil" To: "'Billy Tetrud'" References: In-Reply-To: Date: Fri, 9 Jul 2021 16:18:26 -0700 Message-ID: <00e201d77518$b8ed8e00$2ac8aa00$@voskuil.org> MIME-Version: 1.0 Content-Type: text/plain; boundary="Apple-Mail-B536C3F7-971B-429C-A0ED-DD5AD14AC7BA"; charset="UTF-8" Content-Transfer-Encoding: quoted-printable X-Mailer: Microsoft Outlook 16.0 Thread-Index: AQJUZ/TNyto1vPqYi1vmX7jHk2R5NgFwqRZM Content-Language: en-us Cc: 'Bitcoin Protocol Discussion' 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 23:18:29 -0000 >> 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. >You're using terms in non-standard ways. Putting money into a bank is = not considered "lending" to the bank. What people consider is irrelevant, all that matters is what is correct. = A bank account as you are referring to it is indistinguishable from a = money market (investment) fund in all aspects but federal reserve = membership and regulatory controls. Interest (and offset expenses) = derives directly from their earnings on this *investment*. Describing it = otherwise is either an error (leading to false conclusions) or a lie. > You may make a case that you're lending to a bank, and that they = legally owe you repayment of that money on demand limited by the terms = you mentioned. But regardless of a case that can be made there, pretty = much no one considers that "lending". Since you you like defining things = legally, depositing money in a bank is legally not defined as lending to = the bank. Please don=E2=80=99t bother to try and use statue as if it was at all = relevant regarding economic concepts. > So no, all other scenarios do not imply lending. You can have your = coins in custody with someone else, and that someone else can keep 100% = reserves if they choose (or agreed to) and can prove it to you via the = method I described or the methods others have linked to.=20 That=E2=80=99s what Rothbard calls a =E2=80=9Cwarehouse=E2=80=9D - in = order to distinguish it from investment. I=E2=80=99ve already made this = distinction. Easier to prove with your own wallet, as I said. You are = conflating this with banking, which should be obvious. >> They are time deposits, read your bank agreement. > You are = https://www.investopedia.com/terms/t/timedeposit.asp#:~:text=3DA%20time%2= 0deposit%20is%20an,pre%2Dset%20date%20of%20maturity.&text=3DTime%20deposi= ts%20generally%20pay%20a,of%20investment%20is%20term%20deposit.. = https://www.slsp.sk/en/personal/faq/what-is-the-difference-between-a-term= -deposit-and-savings-account if you don't believe me. The only way you = would be correct is if banks were committing fraud and calling something = a "savings account" when it isn't in fact a savings account. No, I am not wrong. It's not a question of believing you, it's a = question of understanding the concepts. You will find this language in = your deposit agreement (as required by statute): "9. Our right to require advance notice of withdrawals For all savings accounts and all personal interest-bearing checking = accounts, we reserve the right to require seven days=E2=80=99 prior = written notice of withdrawal." https://www.chase.com/content/dam/chasecom/en/checking/documents/deposit_= account_agreement.pdf "When a man deposits goods at a warehouse, he is given a receipt and = pays the owner of the warehouse a certain sum for the service of = storage. He still retains ownership of the property; the owner of the = warehouse is simply guarding it for him. When the warehouse receipt is = presented, the owner is obligated to restore the good deposited. A = warehouse specializing in money is known as a "bank."" - Rothbard As you can see, he is not talking about what you are talking about when = it comes to colloquial use of the term "bank", he is clear to define = what he means by "bank". "Someone else's property is taken by the warehouse and used for its own = money-making purposes. It is not borrowed, since no interest is paid for = the use of the money." - Rothbard Any expectation of interest implies *borrowing*, in other words, a = *loan* to the bank. "Whether saved capital is channeled into investments via stocks or via = 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 = not 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 = spotless record of satisfying their obligations. > Lol, money markets are so new that they've had no opportunity to show = their 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 funds... The first money market mutual fund to break the buck was = First Multifund for Daily Income (FMDI) in 1978, liquidating and = restating NAV at 94 cents 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 = funds 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 = course 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 and thereby lower rates). In the past, absent pork, they = had raised money where necessary to maintain their NAV (just as banks = do, but they go to the taxpayer, and just as all business do from time = to time). These are remarkably stable in terms of NAV. And people seem to be = satisfied 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, = retail money market funds had $940 billion in Assets Under Management = (AUM). Institutional funds had $1.75 trillion under management.[19]" The point being, that this is as close to free market bank-based = investing as exists in the white market. In a money market fund, the NAV = is reflected 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 they maintain has been very effective in maintaining their = $1/share *target* despite paying *interest* on *investments*. They are = merely shifting market returns 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 = they can withdraw their money from their accounts. People expect this. Irrelevant, people have minds and free will and can read the contracts = they are actually signing. Contracts are the *actual* Law associated = with non-aggression. > Banks are doing nothing to educate people on the limitations of that = fact. Again, irrelevant. And wholly unnecessary given compulsory taxpayer = deposit insurance. > PoR would give people the ability to see quite accurately how much = reserves there are and can use this knowledge to put pressure on = institutions to keep the reserves those people think they should keep.=20 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 flawed understanding of banking to start with, they will be = disappointed in the outcome. >> Without 100% =E2=80=9Creserve=E2=80=9D there is no way to = cryptographically demonstrate =E2=80=9Csolvency=E2=80=9D.=20 > You can show proof that you're 80% solvent, and then claim the other = 20% is in other assets. This is, again, still useful.=20 80% solvent ... 50% pregnant. >>The schemes don=E2=80=99t preclude hacks, insider or otherwise, = bankruptcy, or state seizure, no matter what the reserve > You're right, but that's irrelevant.=20 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 = saying 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 how much capital has been burned on this futile exercise, = simply due to a failure 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 = wrote: > On Jul 9, 2021, at 10:44, Billy Tetrud = wrote: >=20 > > there is an unsupportable leap being made here >=20 > You think that because you're misinterpreting me. I'm in no way = claiming that any solvent company can prove it, I'm simply claiming that = any company can prove that they have bitcoin reserves to cover bitcoins = promised as account balances.=20 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 >=20 > 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 = taxpayer 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 = difference. How the contract is satisfied is not a term of the contract, = just that it is. And as I pointed out, money markets have had no reserve = requirement and have a nearly spotless record of satisfying their = obligations. > And certainly customers expect to be able to withdraw their cash on = demand.=20 Irrelevant. > > With a 100% of investment cash hoard, there is zero lending and zero = return >=20 > 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 >=20 > Indeed. Again, you seem to be misunderstanding me. You're putting the = words "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 the customer/client. Without 100% =E2=80=9Creserve=E2=80=9D there is no way to = cryptographically demonstrate =E2=80=9Csolvency=E2=80=9D. And even with = that, investors would have to accept the promise that there are no other = liabilities. The schemes don=E2=80=99t preclude hacks, insider or otherwise, = bankruptcy, 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 = invest, 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