What this framing of cryptoasset leverage most resembles is fractional reserve banking (a subject that is somewhat fraught.)
6.1/x
6.1/x
Fractional reserve banking:
If you tot up all of a bank’s customer’s deposit slips and count all of the money in that same bank’s vault, you will find that the bank only has enough on hand to pay back 10% of its customers.
6.2/
If you tot up all of a bank’s customer’s deposit slips and count all of the money in that same bank’s vault, you will find that the bank only has enough on hand to pay back 10% of its customers.
6.2/
The same dollar has been lent out and redeposited multiple times—just as the same ETH token can be used to fund multiple ICOs
6.3/
6.3/
In the 1800s, without the federal reserve acting to backstop these deposits macroeconomic volatility was highly elevated as bank failures reverberated into the economy and economic downturns prompted bank failures.
6.4/
6.4/
Banks issued their own currencies.
They literally printed their own money sometimes back-stopped my moneys from other banks, sometimes backstopped by gold.
(Sometimes backstopped by nothing at all.)
6.5/
They literally printed their own money sometimes back-stopped my moneys from other banks, sometimes backstopped by gold.
(Sometimes backstopped by nothing at all.)
6.5/
Federal oversight, deposit guarantees and the willingness of the Fed to serve as lender of last resort ultimately stabilized the system.
6.6/
6.6/
Since there is no effective oversight function in cryptoassets, nor even a well-developed monitoring function for developer teams (at least to date), one should expect the cryptoasset market to remain similarly pro-cyclical at least over the medium term.
6.7/
6.7/
The system’s embedded leverage is likely to both extend down-cycles and up-cycles until there is a mechanism by which teams can be held to account for their financial stewardship.
6.8/
6.8/
From a developer perspective this means that any cryptoeconomic models should be designed to be extremely robust to both upwards and downwards volatility.
6.9/fin?
6.9/fin?
