Is crypto being loaned to people to other things with? And if so, what? I thought the thing about crypto was that there was a set amount, doo dah, doo dah, and what you had was confirmed by this infinitely large ledger kept on servers all over the world so there could never be more than actually existed (unlike fiat currency which can be infinitely loaned out and thereby multiplied).
Which class did I miss where this was discussed?
I am by no means an expert on this, but I think what you’re missing is the difference between the crypto blockchains and some of the platforms that offer financial services to people that are off the blockchain.
The total amount of Bitcoin is finite, and who has what is confirmed on the blockchain. They’re analogous to a national mint, producing a finite number of uncounterfeitable (by hypothesis) dollars.
Celsius (the marketplace that suspended withdrawals) isn’t part of the blockchain. They’re a third party that people ‘deposit’ their BTC with. I’m using BTC, but they apparently operate in a whole bunch of currencies. They then do a whole bunch of lending of, and on, those BTC - apparently paying up to 17% APY. They’re analogous to a bank.
That’s why you can have the Bitcoin equivalent of a bank run - not on the blockchain itself, but on a third-party platform that is ‘off-chain.’ Or rather, off the primary chains for each currency - my understanding is that a lot of these platforms actually operate on their own blockchains with their own native tokens.
That’s kind of how people are trying to get around some of the scalability/expense issues with the big decentralized ledgers like bitcoin and ethereum, that require a ton of computing work to process transactions. They set up side chains and “level 2” platforms that do a lot of transactions ‘off-chain.’ But the security that the massive decentralization of the big blockchains provides doesn’t actually transfer to the side chains, which is why they can collapse.
TL;DR - the cryptocurrency itself is decentralized and (probably) trustworthy, but too expensive to use; the companies offering you the services for wallets and platforms aren’t all that expensive, but they aren’t as secure as the crypto blockchains and can go belly-up.