See, this is the whole rub with crypto. It is complicated. I'm a technical person, and I go to great lengths to understand the concepts. But I've noticed that even seasoned crypto investors will have major misconceptions or gaps in their knowledge about crypto. Things that actually matter to them, too, not just semantics.
And the only way for it to see mass adoption is by "middlemen" making it easier to use. This is what CEXs are. But the existence of CEXs destroy the decentralization of it all, even for people who don't use the CEX.
Everyone who has bitcoin on Coinbase really just has an IOU for bitcoin that Coinbase owns. What do you think happens when/if Coinbase starts giving out more IOUs than they own in Bitcoin? This is essentially printing Bitcoins.
With traditional banks, there are laws that regulate this. There cannot be such laws in crypto.
There is nothing stopping Coinbase from printing more IOUs than they have in BTC. There's nothing stopping them from printing more IOUs than there are Bitcoin that exist.
This is the power that banks and CEXs wield. By printing out more IOUs, they are essentially creating new BTC even though that is not possible. These IOUs serve as BTC in and of themselves, and therefore affect the supply in the context of valuing the crypto currency on the free market.
This becomes a problem if too many people try to exchange their IOUs for the real thing at once (a bank run). Or if people find out you're doing this.
This is all completely irrespective of the actual cryptocurrency. You can do this with literally anything, but is especially doable with currency where people don't actually want the thing physically, they just want it in their name.
See, this is the whole rub with crypto. It is complicated. I'm a technical person, and I go to great lengths to understand the concepts. But I've noticed that even seasoned crypto investors will have major misconceptions or gaps in their knowledge about crypto. Things that actually matter to them, too, not just semantics.
And the only way for it to see mass adoption is by "middlemen" making it easier to use. This is what CEXs are. But the existence of CEXs destroy the decentralization of it all, even for people who don't use the CEX.
Everyone who has bitcoin on Coinbase really just has an IOU for bitcoin that Coinbase owns. What do you think happens when/if Coinbase starts giving out more IOUs than they own in Bitcoin? This is essentially printing Bitcoins.
With traditional banks, there are laws that regulate this. There cannot be such laws in crypto.
LMAO. You need to read up on Judaism.
There is nothing stopping Coinbase from printing more IOUs than they have in BTC. There's nothing stopping them from printing more IOUs than there are Bitcoin that exist.
This is the power that banks and CEXs wield. By printing out more IOUs, they are essentially creating new BTC even though that is not possible. These IOUs serve as BTC in and of themselves, and therefore affect the supply in the context of valuing the crypto currency on the free market.
This becomes a problem if too many people try to exchange their IOUs for the real thing at once (a bank run). Or if people find out you're doing this.
This is all completely irrespective of the actual cryptocurrency. You can do this with literally anything, but is especially doable with currency where people don't actually want the thing physically, they just want it in their name.