Elon Musk: Bitcoin Structure is Brilliant, But Has Its Cons; Paper Money is Going Away (ark-invest.com)

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Elon Musk: Bitcoin Structure is Brilliant, But Has Its Cons; Paper Money is Going Away (ark-invest.com)

Posted by msmash on Wednesday February 20, 2019 @06:05AM from the closer-look dept.

Elon Musk, who among other things, is a pioneer in the payments industry, has weighed in on one of the most divisive topics in finance today: Bitcoin. In a podcast with Cathie Wood of ARK Invest, Musk, the co-founder and chief executive of electric car maker Tesla, was asked to "go off topic" and offer up some thoughts on the most famous cryptocurrency. From a report: "I think the bitcoin structure is quite brilliant. But I'm not sure that it would be a good use of Tesla's resources to get involved in crypto," he told Wood. Musk, who founded PayPal, added that the days of paper money are numbered and digital currencies could offer a more efficient solution to shifting value. "Paper money is going away and crypto is a far better way to transfer value than pieces of paper, that's for sure, but it has its pros and cons," he said.

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Physical money will never go away by Larry+Lightbulb · 2019-02-20 06:10 · Score: 4, Insightful

If he means money made of paper, then he's probably right, but wrong otherwise. There's plenty of people who don't, won't, or can't have a credit card and more who wouldn't have a personal computing device to do their daily transactions with.
1. Re:Physical money will never go away by fahrbot-bot · 2019-02-20 06:27 · Score: 4, Informative
  
  If he means money made of paper, then he's probably right, but wrong otherwise.
  Case in point, the Bank of England now uses polymer banknotes for their current £5 and £10 denominations and will use that for higher ones in 2020. Many other countries have done the same for their currencies. Polymer notes are (reportedly) cleaner and stronger (allowing them to last longer) and safer (can incorporate more security features).
  
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  It must have been something you assimilated. . . .
2. Re: Physical money will never go away by Shaitan · 2019-02-20 07:18 · Score: 2
  
  It sounds like you gentlemen don't want to be in the NSA database. Sounds like we need to flag you for review.
3. Re:Physical money will never go away by Shaitan · 2019-02-20 07:35 · Score: 4, Interesting
  
  No, it would be about making everyone account for all their money.
  The problem is that the people who are hiding their money tend to be the poor. A handyman is a good example, these people don't make all that much money, what they do make is on a cash basis and they usually pay taxes on little or none of that money. This is what makes it possible for you to hire someone on craigslist who comes and installs an appliance for a reasonable rate. There isn't much tax to be gained here.
  The people who are dodging significant amounts of tax that are worth pursuing are doing it legally. The biggest dodges are dodging income entirely. There are several ways to do that, real estate is a good one, just reinvest the proceeds or if you own a boatload of stock in a company only sell what you need and give a chunk to charity or to pay a debt to avoid paying tax on it. The stock you gave away counts as money spent but only stock you cash in and dividends count as income.
4. Re:Physical money will never go away by b0s0z0ku · 2019-02-20 08:04 · Score: 3, Insightful
  
  No, but society can use the poor as an excuse to keep cash payments as an option, thus preserving privacy for everyone (including the less poor).
5. Re:Physical money will never go away by Shaitan · 2019-02-20 08:09 · Score: 4, Interesting
  
  Troll lol. I guess there are few rich tech beasts with mod points.
  If you want to see an example of how the dodge income scam the rich play works just refer to the taxes Warren Buffet helpfully revealed. I'll fudge the numbers because I'm too lazy to look, the concept and rough scale is right. His actual gains were billions but he only directly cashed out maybe 20 mill and dodged almost all the tax on that giving another chunk to charity. For the most part he is able to invest in new companies, make acquisitions, etc by using stock to do it. Hell, he could pay everyone down to his lawn service in stock for all I know and they'd be crazy not to take it as the stock has a good return and appreciates over time unlike cash which depreciates with inflation.
  This is the loophole which needs closed, these are the tax dodgers we need to go after. Leave the handyman alone, if he does well his business will grow and he won't be able to hide his few thousand a year from the IRS anymore. For the most part small independent business people like the handyman turn out to have a sense of ethics and want to bring it above board as soon as they have enough going on for it to be worthwhile anyway. That is why the IRS doesn't expend many resources tilting at that windmill.
6. Re:Physical money will never go away by Immerman · 2019-02-20 08:51 · Score: 3, Interesting
  
  No, mostly they're called people trapped in a bad situation created by the society they live in. Even assuming someone screwed up to create the problem in the first place, how are they supposed to go about putting their life right again when they can't even get paid for working? (How many decent employers do you know that will pay with cash instead of check?)
  I do think that society should recognize that it *creates* such people, and work to fix the flaws that produce such people, and make sure that people born into such conditions through no fault of their own, find it easy to leave. "Tough love" only works when a person's problems are of their own creation, not when it's a systemic problem that might keep you trapped just as surely as it traps them, had you been unfortunate enough to be born or stumble into it.
  If we want to encourage everyone to be productive members of society, we need to make it *at least* as easy for the poorest among us to be upwardly mobile as it is for most, not more difficult. But we live in a society that throws up a whole lot of barriers to that climb, some of them pretty substantial. I know people who would be financially devastated by earning a 10% raise - it would push them off the "welfare cliff", and not be nearly enough for them to reach to other side. It is to our shame as a society that we allow such traps to exist.
  
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  --- Most topics have many sides worth arguing, allow me to take one opposite you.
7. Re:Physical money will never go away by CanadianMacFan · 2019-02-20 09:07 · Score: 2
  
  I was reading an article a few years ago about poor people who were getting their benefits with prepaid debit cards and the troubles they have. One other thing than what you've mentioned is that there's a limit on how much cash that they can take out via an ATM in order to pay their rents. So they have have to use the ATM a bunch of times to get enough to pay the rent and each time they use it they get hit with a big access fee.
8. Re:Physical money will never go away by Xylantiel · 2019-02-20 09:21 · Score: 2
  
  It's worse: printed money is mostly gone already. I don't keep my money in cash, it's a number in a bank register. The federal reserve doesn't print more pieces of paper or anything, they change the rate at which some numbers in a register change. This just demonstrates how dumb the typical bitcoin discussion is compared to the actual dynamics of currency and its management in modern financial systems. These are typically the same ignorant people who think a deflationary currency like bitcoin is a good thing. You do not want people storing value in things that have no actual long-term value. It's a proven recipe for economic disaster (aka people starving to death while food rots in the fields). You want people to use currency to then store value by investing in real things that have future utility.
  The dream of distributed banking is largely a fantasy. Anybody who wants to act as your banker but doesn't want to be subject to the banking laws is likely trying to scam you. Wait... were we talking about paypal...?
9. Re:Physical money will never go away by Solandri · 2019-02-20 09:59 · Score: 3, Interesting
  
  For those who haven't seen (felt) polymer banknotes (i.e. Americans), they're like Tyvek sheeting used to wrap houses and also for certain large USPS envelopes (visit the post office). Very strong, durable, and tear resistant.
  
  U.S. currency has to go through certain, brutal tests before it's approved. One of these tests is to roll it into a tight cylinder inside a metal tube, then a piston travels down the tube to smash the paper cylinder down length-wise. This test is repeated multiple times. Any new bill or security feature has to survive this process before the U.S. will adopt it. This is why U.S. bills don't have large holograms like bills from some other countries - this rolling/crushing test destroys them. This is probably also why we haven't adopted polymer notes yet. The polymer notes are resistant to folding, and this test is pretty much the ultimate force-fold test. It probably weakens if not tears some of the plastic fibers substantially, whereas the more pliable plant fibers in paper bills can survive it.
10. Re: Physical money will never go away by Anonymous Coward · 2019-02-20 10:00 · Score: 2
  
  Agreed. It's dangerous with all this talk about cracking down on the means of the little people (we need to regulate crypto, we need to go cashless for society) when the rich will always have some loophole. We don't even have to make it a 70 precent top tax either. If we could evven get the majority of the top to even pay a true 30 precent of their income without loopholes (as in they get no tax deductions) that be better than the state we have now.
11. Re:Physical money will never go away by thegarbz · 2019-02-20 10:51 · Score: 4, Insightful
  
  England? Now? Australia introduced those as a complete set for general circulation 27 years ago https://en.wikipedia.org/wiki/...
  Holy shit I'm getting old. I remember that.
12. Re:Physical money will never go away by Local+ID10T · 2019-02-20 11:07 · Score: 3
  
  Why would anyone give away 2% of the profits to a payment processor?
  Because I make significantly more sales by accepting cards than I would if I only accepted cash.
  The convenience factor of paying by card encourages people to spend more than they would otherwise. Often customers come in, pick out an item, see more items that are of interest, ask if I accept cards, and then buy several items.
  Some people carry cash. Some carry only a card. Some carry only a phone. Most can pay multiple ways. As a merchant it is part of my job to make it convenient for customers to pay me.
  
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  "You want to know how to help your kids? Leave them the fuck alone." -George Carlin
13. Re:Physical money will never go away by mbkennel · 2019-02-20 12:18 · Score: 2
  
  Because the payment processor lets you essentially issue credit to buyers but the credit risk of the buyer has been shifted onto the bank instead of the merchant.
  
  The trade-off is a percentage of revenue in return for potentially higher volume that wouldn't occur otherwise.
  
  What's the difference between a personal computing device and a payment card reader? Nothing very important.
14. Re:Physical money will never go away by j-beda · 2019-02-20 13:14 · Score: 2
  
  Gifting shares of stock to another just transfers the cap gains over to them, and reduces one's lifetime gift exemption.
  Paying someone with stock is likely viewed as selling them the stock, and thus would trigger the cap gains being realized. Selling it for less than its market value would reduce those gains, but of course would reduce the amount of money you get for it even more.
  Donating stocks does give you a charitable deduction, and avoid the cap gains on that stock, but you are still poorer than if you had sold the stock, paid the taxes, and kept all the rest for yourself.
  Here are some details: https://www.forbes.com/2010/07...
15. Re:Physical money will never go away by Enigma2175 · 2019-02-20 13:49 · Score: 4, Informative
  
  An even better example is Donald Trump. In 1995, he claimed a loss of $916 million on his personal tax return. But he didn't lose a billion dollars. His company didn't even lose a billion dollars. The banks that lent him the money that he lost on his horrible property deals were the ones that realized the loss. From TFA:
  
  Investors, for example, can walk away from a property and record the investment as a loss — even if they were playing with borrowed money. While a profit from that same property would be treated as a capital gain, losses are treated as “operating losses” under a tax code provision that dates back to the Great Depression. Those losses can be deployed far more flexibly than capital losses to shield other income from taxation.
  “He was forced to sell many of his investments in the early 1990s, at pennies on the dollar, teetering on bankruptcy,” Edward Kleinbard, a tax expert at the University of Southern California, said of Mr. Trump. “There were real economic losses from those investments — borne entirely by the lenders. Yet nonetheless he was able to emerge with a large net operating loss to carry forward, attributable primarily to losing other people’s money.”
  Not to mention the fact that any money that he acquired previous to that (mostly from his father) wasn't taxed either, partially by exploiting the current laws and in some cases just flaunting them to dodge taxes. Things like vastly understating the value of property that his father was transferring to Donald in order to avoid gift taxes, setting up sham corporations to funnel money to Donald and his siblings and getting paid large sums of money for "property management" services when Donald was just 3 years old. Some of the techniques were legal, some were of questionable legality and some were blatantly illegal. But rich people have armies of lawyers to besiege the IRS when anything is questioned so they rarely are held accountable even for the small fraction of tax frauds that are discovered.
  And the whole reason that some of these tax schemes are legal is because the government is owned by the rich and powerful, they basically shape any tax legislation to their ends. Rich people have obscure methods for shielding their income from taxes because they wrote the laws that created those methods. It takes a hell of a lot of landscapers under reporting their income to equal the taxes dodged by one billionaire.
  
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  Enigma
16. Re:Physical money will never go away by Shaitan · 2019-02-20 18:36 · Score: 2
  
  Giving to charity is not an alternative to tax but that debate aside the loophole isn't giving to charity, the loophole is that you don't pay tax on stock unless you sell it and they give the stock to charity, not money that would count as income.
  For normal people that wouldn't really be a loophole, $100 in stock is like a $100 more or less, the charity just sells it. But you don't pay tax on stock until you sell it. The argument is that you have to sell it eventually and you'll pay tax then but if you give it to a charity, aka a non-profit no taxes are paid on that money. Additionally, when you are a billionaire you never pay tax on the money you don't need. As I indicated Buffet made billions, he should pay taxes on billions, instead he paid tax only on the 20 million he cashed out. At that rate he will never pay the tax on the money he made that year let alone all the money he has made. It's a beautiful scam, you see he made billions, he only reported 20 million but on paper he reduced his "taxable income" even further to single digits and then paid on that allowing him to claim an effective tax rate on par with the lower middle class. His actual tax rate came nowhere near 1%.
  How many top 5% working class 139k/yr workers does it take to add up to the billions he dodged tax on? Worse that he can then reinvest and take the future proceeds on? His gains on just the taxes he dodged have definitely dwarfed every penny he paid in taxes since and likely will for some time to come and they compound.
Forgets digital money relies... by blahplusplus · 2019-02-20 06:12 · Score: 2

... on power. If there's ever a power outage of any significance your "economy" is fucked. Doesn't seem very sound to have such a point of failure. It would make it trivially easy to fuck up anyones economy in case war broke out. Seems like a recipe for disaster.
1. Re:Forgets digital money relies... by Comrade+Ogilvy · 2019-02-20 06:28 · Score: 4, Interesting
  
  We are already past ten toes over that line. When there is a power outage most businesses shut down, because they cannot process credit cards. Many cannot even process cash.
  Obviously much of this is still solvable with cash around. Supposedly.
  Of course, this larger ominous question is why the banks were bailed out with the 2008 meltdown. Because if all the big banks were suddenly forced to file for bankruptcy, would the credit cards still work? Could you get gas and get to work? Can that gas station actually get gasoline delivered? Can your grocery store get restocked?
  Once a business, say, a gasoline distributor, goes into bankruptcy, they cannot suddenly create a novel procedure to extend credit to the corner station without approval from a judge.
2. Re:Forgets digital money relies... by Immerman · 2019-02-20 06:58 · Score: 3, Insightful
  
  That's a good reason for keeping the banks alive, not a good reason for bailing them out though. Buy them out, to the tune of their existing debt, break them up, and send them on their way, with large low-interest government loans to repay. After imprisoning all the executives that decided their personal profit was more important than national security. And all the regulators who were either incompetent or corrupt enough to not spot the problem sooner.
  
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  --- Most topics have many sides worth arguing, allow me to take one opposite you.
Expert in something != Expert in the other thing by 140Mandak262Jamuna · 2019-02-20 06:15 · Score: 3, Insightful

Normally that is how I would respond. But in this case there are some mitigating circumstances. Elon was involved with Paypal, some sort of payment tracking system. And it is mentioned to be off-topic. So I am going to be a little forgiving here.

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Paper money is not going away by sjbe · 2019-02-20 06:18 · Score: 5, Interesting

I think the bitcoin structure is quite brilliant.
The blockchain technology might be brilliant. Bitcoin very definitely is not. We shouldn't confuse the two. The jury is still out on blockchain but I think the more interesting uses of it won't be for currency. Bitcoin is an interesting but ultimately flawed experiment which might also be a pyramid scheme either intentionally or unintentionally.

Paper money is going away and crypto is a far better way to transfer value than pieces of paper, that's for sure, but it has its pros and cons
This is just idiotic. Paper money isn't going away any time soon and neither is fiat currency. Maybe in the far future but even then I doubt it. There is simply too much utility in paper money for a lot of transactions. Asking everyone to either carry an expensive computer with them or carry some means to interact securely with one in order to facilitate even the most basic transaction is unrealistic. Not everyone can get a credit card or afford a smartphone and even if they could it still wouldn't be practical some of the time.
If he actually thinks the dollar is trading bits of paper he has no idea what money actually is. (I doubt he's that naive) The vast majority of currency is nothing more than digits in a ledger somewhere. Paper currency is a tiny fraction of the total amount of money in circulation. Somewhere less than 10% of the total.
1. Re:Paper money is not going away by thereddaikon · 2019-02-20 07:04 · Score: 2
  
  Blockchain is a federated ledger. That is pretty cool once you account for all the usual shortcomings of federated systems. The problem with blockchain right now is that its suffering from the same buzzword effect you see with every new tech. Too many people want that juicy VC money so they are all trying to come up with new ways to implement the new buzz word. That means it inevitably becomes the butt of every joke because blockchain is advertised as the solution to every problem. It isn't, we all know that. It is a solution to some problems. And in cases where it makes sense its very clever indeed. Blockchain has a lot of potential, especially between institutions who's databases may disagree or within logistics networks. I could see financial institutions using it to keep track of transactions and FedEx so they never lose a package again for example. But it has downsides like anything else. We've already seen security issues where enough compromised clients can flip the system and in effect rewrite the history on the ledger. This is very bad. It's also not particularly useful outside of cases where you need a lot of different systems to track the status of a thing that changes hands often.
2. Re:Paper money is not going away by b0s0z0ku · 2019-02-20 07:45 · Score: 2
  
  I was more cashless for a long time, then I got poor, so I started using more cash. Makes budgeting easier, and feels comforting to have actual money in my pocket.
This is Retarded by NicknameUnavailable · 2019-02-20 06:18 · Score: 2

Cryptocurrencies are dependent upon our tech infrastructure being stable enough to validate them. If government-backed currencies die then that tech infrastructure wouldn't be far behind (if at all.)
You can have my paper money by bobstreo · 2019-02-20 06:22 · Score: 3, Interesting

when you pry it out of my cold dead mattress. /s
Especially when I can get a discount for using cash instead of the seller having to pay a transaction fee if a credit card or some other method of payment is used.
1. Re:You can have my paper money by danlip · 2019-02-20 08:44 · Score: 2
  
  Yes, it was called Zem and lived in the swamps of Sqornshellous Zeta. Many of them are slaughtered, dried out, and shipped around the galaxy to be slept on by grateful customers. https://hitchhikers.fandom.com/wiki/Mattresses
Re:Expert in something != Expert in the other thin by Thelasko · 2019-02-20 06:26 · Score: 4, Insightful

He has two bachelor's degrees. One in economics and one in physics. His experience with PayPal aside, Bitcoin is firmly within his areas of expertise.

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One of our competitors trademarked the term "hypothesis". From now on, we will call them "boneheaded ideas".
Wide swings in value is not a "con" by xxxJonBoyxxx · 2019-02-20 06:29 · Score: 4, Insightful

Wide swings in value is not a "con" - it's a non-starter for the general public. Ask the Weimar or anyone unfortunate enough to live in Venezuela.
Those folks are already getting debit cards by rsilvergun · 2019-02-20 06:45 · Score: 5, Informative

shoved down their gullets. I know a few guys with fucked up finances and crap jobs. They don't get checks, they get money on a debit card every week or two.

It's sucks of course. There's fees and it's a major pain to use. But here's the rub: nobody really cares about these people. I mean, the current administration just rolled back a ton of consumer protection and anti-payday loan rules and nobody batted an eye. I only know about it because the crazy left wing sites I like complained about it (the kind that run articles on "The high cost of being poor".

TL;DR; If you're well enough off that you matter you're already getting away from cash because going to understaffed banks and waiting in line is a drag. If you're poor enough to depend on cash you're gonna get dragged into the cashless economy and taken advantage of by it, but nobody care.

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1. Re:Those folks are already getting debit cards by Anonymous Coward · 2019-02-20 07:45 · Score: 4, Insightful
  
  "Crazy left wing sites". The irony of it is that those sites would be moderate, fence sitters in any other country.
  It isn't hard to wind up in that category. A former co-worker closed a bank account. A year later, some place hit the account with an ACH debit, and then the bank placed the co-worker on the Chex Systems blacklist. Even though the account was closed, that $25 for some yearly thing became $250 with all the fees the bank assessed. No word was sent to the co-worker by mail. He found out about it when his savings account was closed by the current bank.
  The current US system has no protection for anyone but businesses. It is like the early 1900s, all over again, with hucksters and snake oil sellers everywhere, no laws to protect consumers, and step out of line, and the Pinkertons will end you. Only difference is that we have a recession-proof economy that only goes up and a stock market which is crashproof, so most people really don't care about this stuff.
2. Re:Those folks are already getting debit cards by Anonymous Coward · 2019-02-20 07:50 · Score: 2, Insightful
  
  Getting COMPLETELY away from cash is what boggles my mind. Sure, all my professional and mostly personal things are handled electronically, but I often travel to weird places, at weird times, where things like electricity or signal can not only not be relied upon, but sometimes don't exist to begin with. Not having say, $200 in cash is just mind boggling to me.
  I guess if I never left my green zone I wouldn't care, but why live that way.
3. Re:Those folks are already getting debit cards by Anonymous Coward · 2019-02-20 11:12 · Score: 2, Funny
  
  Funny thing, a friend of mine just moved to Europe from the US because in the US there is a far right, a crazy far right, and an even further right and nothing else and he was tired of looking at the lazy rich deadbeats getting fat while he and everyone else worked for them for peanuts and lousy healthcare.
  Of course, another friend recently moved to Mars because he was tired of listening to stories about imaginary friends and absurd one-sided geographic generalizations about politics, which is all the folks on Earth ever talk about. I'm thinking of joining him there.
Handling paper money isn't free by sjbe · 2019-02-20 06:55 · Score: 2

Why would anyone give away 2% of the profits to a payment processor?
You think processing cash is free? ALL forms of payment processing cost money, including cash. You have to pay people for their time to track it, organize it, deposit it, secure it, etc. Not to mention the fact that cash is rather easy to steal. None of this is free. In some cases it might cost less than what a credit card company charges but sometimes it costs more.
Physical money may go away by ranton · 2019-02-20 06:58 · Score: 2

While I don't think it is a given, moving to a cashless society in the US is a possible future. But the only way I see it happening is if the government stops subsidizing cash and pushes the costs on those who decide to use cash. The cost of printing money, storing money, disposing of money, investigating counterfeit money, investigating tax evasion from off the books transactions, etc. costs tens of billions of dollars a year. If the US Treasury started offloading those costs to banks who request cash, who would then transfer those costs to consumers, cash usage may drop significantly. Instead of offering a discount for using cash, companies may charge extra for cash transactions.
Credit card transactions are only more expensive because of credit card rewards and because the government subsidizes cash. If you remove the subsidies things my become far more even.
If Congress then changed the law so companies do not need to accept cash for transactions, a cashless society becomes even more likely. Once again, I'm not saying it is certain, just that it is possible.

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-- All that is necessary for the triumph of evil is that good men do nothing. -- Edmund Burke
Podcast by Thelasko · 2019-02-20 08:43 · Score: 2

Since this is a podcast, it should be noted that the cryptocurrency question is asked around the 25:40 mark.

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One of our competitors trademarked the term "hypothesis". From now on, we will call them "boneheaded ideas".
Re:Thanks Rei by Rei · 2019-02-20 09:25 · Score: 4, Funny

You know, I just had a heartwarming thought. I could drop dead tomorrow, and yet for years to come, people on Slashdot would be crediting any story that gets posted about Musk/Tesla to me. It's nice to know that people think about me when I'm not around :)

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