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patio11's profile
Patrick McKenzie
Patrick McKenzie
Patrick McKenzie
@patio11

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Patrick McKenzie

@patio11

I work for the Internet, at @stripe, mostly on accelerating startups. Opinions here are my own.

東京都 Tokyo
kalzumeus.com
Joined February 2009

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    1. Patrick McKenzie‏ @patio11 26 Nov 2017
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      Bitcoin as the world's biggest game of hot potato: https://prestonbyrne.com/2017/11/26/the-bear-case-for-crypto-part-ii-fractional-reserve-marmot/ … @prestonjbyrne Liquidity crunch catalyzed by any disruption in the price would cause a bank run.

      10 replies 77 retweets 208 likes
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    2. Patrick McKenzie‏ @patio11 26 Nov 2017
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      Bitcoiners think that they're structurally immune to bank runs because they repeat "we are not fractional reserves" as an article of faith. That is almost certainly false. Most distressing bit in that article, which I cannot verify but which I do not find implausible:pic.twitter.com/qZf6EXflG5

      2 replies 11 retweets 30 likes
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    3. Patrick McKenzie‏ @patio11 26 Nov 2017
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      Why is that distressing? Because it suggests that, when the Bitcoin music stops, 1+ real financial institutions will take eight or nine figure credit losses.

      2 replies 5 retweets 19 likes
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    4. Patrick McKenzie‏ @patio11 26 Nov 2017
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      I'd like to underline the "When 1+ Bitcoin exchanges looks like it is going to go under, everyone is going to go for the exits in BTC." part of the doomsday scenario. In particular, what happens when any one Bitcoin exchange looks like it is likely to go under.

      1 reply 3 retweets 8 likes
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    5. Patrick McKenzie‏ @patio11 26 Nov 2017
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      What will happen is, to avoid their assets being tied up indefinitely (ala Gox), account holders will try to move their BTC off-exchange. The entire Bitcoin network, which is saturated, can only serve ~3 transactions per second worldwide.

      5 replies 5 retweets 14 likes
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    6. Patrick McKenzie‏ @patio11 26 Nov 2017
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      This means that an exodus from one exchange, in addition to spooking account holders at every other exchange, will make it pretty difficult to move BTC in or out of another exchange.

      1 reply 2 retweets 11 likes
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    7. Patrick McKenzie‏ @patio11 26 Nov 2017
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      Your rational action, as an account-holder of a non-imperiled exchange, is to a) immediately request a wire (yes, a wire) of your USD and b) bid as high as possible for a transaction to exfiltrate your BTC.

      4 replies 2 retweets 6 likes
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      Patrick McKenzie‏ @patio11 26 Nov 2017
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      This turns non-imperiled exchanges into imperiled exchanges, quickly. The technical term is "contagion" and the way to avoid it is *drumroll* "temporarily freeze withdraws."

      8:41 PM - 26 Nov 2017
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      • Armando Preston Byrne Eli Courtwright Jim Gray Ioannis Mavroukakis Christopher F. Nicholson John is dis((so)?|tan)ci(?(?=(?(2)|(?!)))(ati)|)ng Smerity gravityhurts
      5 replies 2 retweets 11 likes
        1. New conversation
        2. Luke Stokes‏ @lukestokes 26 Nov 2017
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          Replying to @patio11 @prestonjbyrne

          People can use decentralized exchanges like @bitshares and use bitUSD to avoid bitcoin volatility. Holding cryptocurrency on an exchange is risky, old-centralized-financial thinking. If you don't control the key, you don't own it.

          1 reply 17 retweets 57 likes
        3.  ⚡️Rasputin ⚡️‏ @WS2X12 29 Nov 2017
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          Replying to @lukestokes @bitshares and

          Hi. Does the exchange manage giving you BTC forked coins? Or do you need to download your BTC to your own wallet and do it? Thanks!

          1 reply 0 retweets 0 likes
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        2. Andrew Kemendo‏ @AndrewKemendo 26 Nov 2017
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          Replying to @patio11 @prestonjbyrne

          That would effectively be the same as a traditional "Bank Run"

          1 reply 0 retweets 0 likes
        3. Sam Parmett‏ @samparmett 26 Nov 2017
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          Replying to @AndrewKemendo @patio11 @prestonjbyrne

          Yup! The subtitle of the blog post Patrick linked at the beginning of the thread is "The Great Bank Run".

          1 reply 0 retweets 2 likes
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        2. Trevor McKendrick‏Verified account @TrevMcKendrick 26 Nov 2017
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          Replying to @patio11 @prestonjbyrne

          i've always assumed e.g. coinbase is holding my BTC, and if i ever wanted USD they'd have to sell it 1st. there could be a run in terms of network bandwidth but I don't get the USD liquidity connection. BTC price should drop until there's USD supply?

          1 reply 0 retweets 0 likes
        3. Fabian Flatz  🦖‏ @fabian_flatz 27 Nov 2017
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          Replying to @TrevMcKendrick @patio11 @prestonjbyrne

          I believe to serve the customers faster most exchange use their own fiat money, a “float”, to pay you back immediately. They then sell your bitcoin later.

          0 replies 0 retweets 0 likes
        4. End of conversation
        1. New conversation
        2. K‏ @rehack20 26 Nov 2017
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          Replying to @patio11 @prestonjbyrne

          Very well put. But please consider this, so many major hacks have happened in exchanges (from mtgox to recent DAO hacks). While the ones tied up to those entities suffer. Others shrug it off. So I don't see the contagion happening. 1/2

          1 reply 0 retweets 0 likes
        3. K‏ @rehack20 26 Nov 2017
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          Replying to @rehack20 @patio11 @prestonjbyrne

          As the OP article said that is a very robust state machine. So the main thing I fear is some black swan event disrupting that state machine (say some Math discovery, which breaks PKI, but then HTTPS will also break). So hodlers, don't care :) 2/2

          0 replies 0 retweets 0 likes
        4. End of conversation
        1. Tigran‏ @hyetigran 27 Nov 2017
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          Replying to @patio11 @prestonjbyrne

          I believe exchanges have been known to freeze withdrawals. Nothing new.

          0 replies 0 retweets 0 likes
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