I guess that a similar story could have happened to Greece. Nice to hear that crypto is helping people in such dire need of economic stability, although it was not clear from the article what happens to the lebanese cash that was used to purchase USDT. Someone must be left holding the bag, there must be some FX liquidity that they tap into?
Think of it as a remmitance system, relatives overseas send money to family in lebanon in bitcoin, these individuals but it off them for cash, they also sell bitcoin to anyone who liquidates local assets for cash and wants to gtfo of Lebanon. Crypto is basically keeping the market somewhat liquid at this point.
> it was not clear from the article what happens to the lebanese cash that was used to purchase USDT
They are purchasing using hard cash (ie USD) outside Lebanon and then transferred there. The article is a bit confusing but this is the key bit:
An agent in Nigeria will collate these sums, buy USDT, and send it to one of the top-level suppliers in Lebanon. Once they have sold it on, they will disburse cash to the originally intended recipient of the remittance.
It's a way to transfer USD (value) to your family in Lebanon. The dealer in Lebanon gets Tether (from the agent in Nigera), and gives cash USD to the family in Lebanon, minus their commission.
> Someone must be left holding the bag, there must be some FX liquidity that they tap into?
You must have missed that 1. Lebanon is very corrupt and 2. there is an official exchange rate. Someone is making a killing selling on the black market and buying with the official rate.
If I were to summarize the Greek situation it is a story about two countries that hate each other but share the same currency. Unfortunately there is no more nuance to be had. It really is that simple.
The Taif Agreement signed in October 1989 to end of the Lebanese civil war, besides other things, called for the disarmament of all national and non-national militias. Hezbollah was allowed to stay armed in its capacity as a "resistance force" rather than a militia
Lebanese issue is that it is being held hostage by a militia (Huzb Allah). No amount of money is going to help until these militias are disbanded and a national independent military is put into place.
Besides having a giant diaspora, this diaspora still has strong ties to the motherland and many of them are also very rich. Lebanon could then come back quickly and reach western levels of development and wealth.
Let's say you build the perfect monetary policy into a cryptocurrency. Okay, now the basic institution of money is working again but what about everything else?
>Over the last two years, Lebanon has been gripped by an economic death spiral, the culmination of years of government corruption and mismanagement. The electricity supply has collapsed, pharmacies and gas stations are empty,
The article mentions infrastructure. First, how do you use cryptocurrencies with limited access to electricity? Second, how does cryptocurrency help with physical infrastructure? Have there been successful cases of countries with private infrastructure? Has there ever been an ICO to pay for a cell phone tower or a solar farm?
The idea, in Bitcoin standard, is that government projects should be financed with taxes; not by printing money. When money has no cost, it inevitably results in loss of responsibility and capital mismanagement. The usual story is that government uses the money printer to enrich themselves, and also funds an army to keep people from overthrowing them.
When government is funded with taxes, there are limits on how much can be spent, and spending follows democratic principles and responsibility. Authoritarian or incompetent governments wouldn't be able to fund themselves, when people refuse to pay taxes to them. This works, because bitcoin can't be inflated and it can't be confiscated.
This is precisely an attribute of the story-line from the game Escape from Tarkov that I didn't understand. It's set in a modern post world-war russia and most of the transactions are completed in the game's "crypto ruble". You can mine currency with GPU's etc outside of the FPS portion of the game. However, without well maintained networks and electrical grids how on earth would a PoW or PoS crypto exist at all?
> First, how do you use cryptocurrencies with limited access to electricity?
You only need to charge your phone once per day. If power goes out, no problem. If you have no electricity at home somebody close by probably has a phone charging business.
The article has a numerator but not a denominator:
> Accurate data on the overall volume of cryptocurrency trading in Lebanon is all but impossible to obtain, due to the informality of the market. Demand fluctuates with the rise and fall of the global cryptocurrency market, but OTC suppliers estimated trading volumes across Lebanon of up to 10 million dollars per week at high points
So… 10 000 000 USD moving via crypto per week of i USD total currency movement per week.
Without this number it’s hard to tell if this is a significant new trend, or just fringe.
It is though. I think you missed the part where it says you can't buy cryptocurrency from within Lebanon except with hard cash and from one of the exchangers. These exchangers have to get the cryptocurrency from somewhere to begin with. They mention that they wire the money to Nigeria and let someone there buy it for them.
Nope, 5% means the black market is quite efficient. Black market operates on high-yield since they are illegal, hard to circumvent and usually monopolized by a few.
There are two things that one needs (in addition to the software, which is free and open source) to connect to the bitcoin peer-to-peer network - Electricity and Internet Connectivity.
Unless states start interrupting either/both, there is no table to be operating under. It just is. It is the table and the chair and the entire economy.
How is it different? How many goods and services can you pay for with cryptocurrency where you live? What if your government's goons (or private goons for that matter) hit you with a rubber hose and steal your coins? Who will help you?
Crypto supporters will talk about how great this is. But is this what we want the world to look like? It's effectively a network of little mafiosi (complete with thugs) providing tenuous bridges to the US economy.
In a cynical moment, despite the idealist beginnings, it's almost like Satoshi was the NSA and global fiscal integration beyond conventional reach of multinationals and the world bank was the objective. Sigh.
i think you missed the part where the real mafiosi broke a country of 6M people.
This allowed a few average-but-enterprising laymen -willing to take on risk- to step up to the plate, make some good money, while also helping the world look a little better for those 6M souls in dire straits trapped in a sh*tshow economy.
> That’s when Lebanon’s cryptocurrency market took off, along with the OTC system run by traders like Awad. The OTC ecosystem here largely operates using Tether, a cryptocurrency pegged to the U.S. dollar and therefore subject to fewer price fluctuations. The process works like this: A client who wants to buy cryptocurrency will usually open a wallet on an exchange (the most popular in Lebanon being Binance) and then meet with an OTC dealer to hand over cash dollars. The dealer will send the same amount of Tether — minus a commission ranging from 0.5%–5% — to their account via a peer-to-peer transaction. The client can then pursue whatever crypto-investment strategy they see fit with the USDT in their digital wallets.
From the frying pan (domestic currency in shambles), into the fire (crypto waiting to implode).
Tether's many problems have been documented elsewhere. What this implies is that the funds being spent by the Lebanese in this story are very likely going into financial speculation, not day-to-day requirements like buying food. And they're using the absolute worst vehicle for doing that.
I think it's wrong to assume its just speculation. Lebanon is a troubled country, and if I've heard correctly their local currency is inflating. So they could just be trying to protect their savings (earned from their labor in many cases no doubt) from being devalued. Perhaps they also want it protected by government confiscation. The might also just keep their funds in USD stable coins (tether is not the only one).
The article mentions the Lebanese pound has "lost more than 90% of its value". For an equivalent loss in value from holding USDT that would mean that each USDT is only backed by 10 cents of value? I mean there are certainly arguments to be made about how much value is actually backing USDT but to claim that it's only 10% seems way off. I think people would be shocked and there would be crypto-wide panic if USDT dropped to 85 cents on the dollar. If USDT 'collapses' that does not mean that one USDT is worth 0$ only that the value drops enough that it causes a structurally significant sell-off. This is what people worry about, not USDT becoming worthless. If I'm Lebanese, yes I'll take the USDT
To give maybe a good parallel take a look at clients of Bernie Madoff's fund. This was by all measures considered a 'collapse' and a 'disaster' but when all was said and done clients still recovered 70-80% of their claims. Granted it took a long time ~10yrs or so but still a very far cry from 10%
[+] [-] mathgenius|4 years ago|reply
[+] [-] sonofajojo|4 years ago|reply
[+] [-] nl|4 years ago|reply
They are purchasing using hard cash (ie USD) outside Lebanon and then transferred there. The article is a bit confusing but this is the key bit:
An agent in Nigeria will collate these sums, buy USDT, and send it to one of the top-level suppliers in Lebanon. Once they have sold it on, they will disburse cash to the originally intended recipient of the remittance.
It's a way to transfer USD (value) to your family in Lebanon. The dealer in Lebanon gets Tether (from the agent in Nigera), and gives cash USD to the family in Lebanon, minus their commission.
The Lebanese pound is never used.
[+] [-] csomar|4 years ago|reply
You must have missed that 1. Lebanon is very corrupt and 2. there is an official exchange rate. Someone is making a killing selling on the black market and buying with the official rate.
[+] [-] imtringued|4 years ago|reply
[+] [-] 908B64B197|4 years ago|reply
I wonder if the best strategy here isn't for the diaspora to just buy back the country for pennies on the dollar during the current collapse.
[+] [-] nl|4 years ago|reply
Edit: Judging by the downvotes, people aren't aware that Hezbollah is a major political party in Lebanon holding 13 seats: https://en.wikipedia.org/wiki/Hezbollah_political_activities
They also have their own private army:
The Taif Agreement signed in October 1989 to end of the Lebanese civil war, besides other things, called for the disarmament of all national and non-national militias. Hezbollah was allowed to stay armed in its capacity as a "resistance force" rather than a militia
https://en.wikipedia.org/wiki/Hezbollah_political_activities...
[+] [-] csomar|4 years ago|reply
Besides having a giant diaspora, this diaspora still has strong ties to the motherland and many of them are also very rich. Lebanon could then come back quickly and reach western levels of development and wealth.
[+] [-] imtringued|4 years ago|reply
>Over the last two years, Lebanon has been gripped by an economic death spiral, the culmination of years of government corruption and mismanagement. The electricity supply has collapsed, pharmacies and gas stations are empty,
The article mentions infrastructure. First, how do you use cryptocurrencies with limited access to electricity? Second, how does cryptocurrency help with physical infrastructure? Have there been successful cases of countries with private infrastructure? Has there ever been an ICO to pay for a cell phone tower or a solar farm?
[+] [-] Geee|4 years ago|reply
When government is funded with taxes, there are limits on how much can be spent, and spending follows democratic principles and responsibility. Authoritarian or incompetent governments wouldn't be able to fund themselves, when people refuse to pay taxes to them. This works, because bitcoin can't be inflated and it can't be confiscated.
[+] [-] PoignardAzur|4 years ago|reply
Infrastructure generally starts out private and gets nationalized over time.
[+] [-] logicchains|4 years ago|reply
The US's energy infrastructure was originally private.
[+] [-] 71a54xd|4 years ago|reply
[+] [-] nkuttler|4 years ago|reply
You only need to charge your phone once per day. If power goes out, no problem. If you have no electricity at home somebody close by probably has a phone charging business.
[+] [-] csomar|4 years ago|reply
With a mobile phone. Unless network communications are also down...
[+] [-] jt2190|4 years ago|reply
> Accurate data on the overall volume of cryptocurrency trading in Lebanon is all but impossible to obtain, due to the informality of the market. Demand fluctuates with the rise and fall of the global cryptocurrency market, but OTC suppliers estimated trading volumes across Lebanon of up to 10 million dollars per week at high points
So… 10 000 000 USD moving via crypto per week of i USD total currency movement per week.
Without this number it’s hard to tell if this is a significant new trend, or just fringe.
[+] [-] IG_Semmelweiss|4 years ago|reply
Greek Uzoo = Lebanese Arak Greek Yogurt = Lebne / Labne Greek Orthodox = Lebanese Maronite Olive oil on everything = Olive oil on everything and so on.
Now they also share similar economic meltdowns.
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] tromp|4 years ago|reply
That's not how it works. Cryptocurrency is not geographically bound.
[+] [-] anonleb4|4 years ago|reply
[+] [-] counternotions|4 years ago|reply
> “That’s my reputation,” Baasiri said. “Gravity fucks the market.”
5% commissions on transactions though, that’s really steep!
[+] [-] landemva|4 years ago|reply
[+] [-] Tangokat|4 years ago|reply
[+] [-] csomar|4 years ago|reply
[+] [-] randomopining|4 years ago|reply
[+] [-] rfd4sgmk8u|4 years ago|reply
Unless states start interrupting either/both, there is no table to be operating under. It just is. It is the table and the chair and the entire economy.
[+] [-] pharmakom|4 years ago|reply
[+] [-] robarker|4 years ago|reply
[+] [-] aorth|4 years ago|reply
[+] [-] tome|4 years ago|reply
[+] [-] bob229|4 years ago|reply
[deleted]
[+] [-] contingencies|4 years ago|reply
In a cynical moment, despite the idealist beginnings, it's almost like Satoshi was the NSA and global fiscal integration beyond conventional reach of multinationals and the world bank was the objective. Sigh.
[+] [-] IG_Semmelweiss|4 years ago|reply
This allowed a few average-but-enterprising laymen -willing to take on risk- to step up to the plate, make some good money, while also helping the world look a little better for those 6M souls in dire straits trapped in a sh*tshow economy.
[+] [-] aazaa|4 years ago|reply
From the frying pan (domestic currency in shambles), into the fire (crypto waiting to implode).
Tether's many problems have been documented elsewhere. What this implies is that the funds being spent by the Lebanese in this story are very likely going into financial speculation, not day-to-day requirements like buying food. And they're using the absolute worst vehicle for doing that.
A ticking time bomb.
[+] [-] BallyBrain|4 years ago|reply
[+] [-] danield9tqh|4 years ago|reply
To give maybe a good parallel take a look at clients of Bernie Madoff's fund. This was by all measures considered a 'collapse' and a 'disaster' but when all was said and done clients still recovered 70-80% of their claims. Granted it took a long time ~10yrs or so but still a very far cry from 10%
[+] [-] lifty|4 years ago|reply
[+] [-] echopurity|4 years ago|reply