If you bought quality USA made screwdrivers in 1980, you must have been surely been disappointed when China started making quality tools for cheaper in the 1990's.
Most people would have stopped caring about quality, and instead started caring about cheap utility. "It's good enough."
Last time I checked Home Depot was doing quite well. There certainly is value in selling things with high utility with a small markup. You just have to do it at scale.
Is this really something that people in the USA spend their days worrying about? Serious question, as it is not part of the law over here in the part of the world where I live. Also, with every crypto transaction recorded on the public ledger and the vast majority of wallets held in exchanges, why wouldn't the police just acquire the crypto too?
I'm sure they could seize it, since they can and do freeze and sieze bank accounts as well.
However self custody ensures they can never get it even if they kill you, and since it is programmable money there is a way to ensure it gets to a friendly address, maybe years later, perhaps to a loved one.
Seems the market places a worth on a possession that can not be taken from you by force, or even by your death, slightly more than 0.
It's true that the market places a worth on crypto assets, but there are many alternative reasons for why that could be as well (such as: I expect it to go up in price for whatever reason and then I'll be rich!). In any case, what is your plan for when https://xkcd.com/538/ happens?
For fun, the number of times I saw "you're posting too fast" trying to post this completely obvious and indisputable comment: 12. I'm not actually posting too fast, I'm just in the HN doghouse for posting comments that irritate its most delusional members.
The author looks at this from the perspective of making money.
Bitcoin is a form of money.
It's like HTTP/HTTPS vs IPv4/IPv6.
Bitcoin operates at a lower level than stocks, looking at it from that perspective is like looking at the facebook home page and trying to understand the value of IPv6.
Investing/speculating is all about increasing a counter. Here we are talking about another separate counter.
Investing is about increasing production capacity or production efficiency, with the expectation of getting a positive return on investment in the future. Everything else is not investing, but speculation.
Transaction processors provide a service consisting in processing transactions, and transaction fees are a good estimate of how much utility such services provide. But this does not not tell us anything about the 'value' of cryptocurrencies.
Depending on the underlying contract / agreement it can be anything you want. I view crypto as any piece of paper.
In general crypto is freely tradable / sellable, and the markets/tools are there. Illiquid 'assets' are a lot more liquid than when hidden / on paper somewhere.
Want the crypto to represent shares in a company? They're worth that.
Want an NFT to represent the ownership or the beneficiary of the profits of some music/IP? Can be worth millions or 0. Depending on the success of that IP.
Want to notarize something on a public blockchain for future proof / timestamping? Probably worth about $500-$2000 or whatever your notary charges.
Want the crypto to represent karma points on hackernews? Priceless!
With the methods the author is using, I think they would also be unable to value gold and other non-producing assets.
Crypto (despite claims that it's a currency) is a digital "asset". Like gold, but without any real-world use like jewellery, coatings, etc, and with a far shorter history of being a store of value. The problem with valuing it then is due to assessing risk.
It could be trading at zero tomorrow, and there are plenty of plausible paths to that scenario.
You also can't take physical possession of it (unlike gold) as well. Crypto value is inherently tied to how secure they are and although they seem to be secure now, that might not actually be the case.
Crypto could crash tomorrow but the value won't be zero, similar to gold it has intrinsic value. Some people value it because they think it's cool, because they think they're fighting the government, because it would've been historically important, ...
Crypto is worthless. All the VCs pouring money into crypto/web3 (a16h, sequoia) are worthless. All the companies pivoting to web3 are worthless (square). All the companies building up web3 teams are worthless (stripe, mastercard). All the fastest growing startups (coinbase, ftx, opensea) are worthless. All the devs who get started in crypto/web3 and won't go back, are worthless.
I don’t know if you’re serious. Your username does check out at least. I also believe crypto itself is worthless. Only the networks behind them and actually providing a service (transaction validation) have some value. The question is: can the networks survive a crypto crash. How do you pay miners with near zero value crypto? I can see a (sad) future where we will be left with central bank digital currencies only (CBDC).
There's a difference between utility and value. Plastic forks, knives, and spoons have high utility (in that they help us to eat). They have very little value, and can be purchased at any dollar store.
So the blockchain doesn't have intrinsic value because the crypto currency doesn't have intrinsic value.
Pretty sure the parent was being sarcastic (and provocative).
In real terms it’s worth whatever the next buyer is willing to pay. It annoys me that people cite the run-up over the last decade as evidence of it’s brilliance when it’s nothing of the sort, but I’d just sound like a loon screaming into the wind.
Personally I think it’s worthless. Honestly I suspect Satoshi Nakamoto (if they’re still alive) probably thinks the same; One of the later posts Satoshi made before disappearing was making the point that if it accrued any value at all then it would be useable to transact and therefore viable.
The problem is that if that’s true of Bitcoin, it’s also true of all tokens, meaning the scarcity argument is entirely imaginary - if one token is perceived as too expensive then the perception of value will shift to another that’s viewed as ”cheaper” (and thus more likely to “mooon!”), meaning the supply of tokens taken as a whole is actually infinite and arbitrary, rather than scarce, and the value of the cryptocurrency market as a whole is therefore infinitely and arbitrarily small per unit (i.e. worthless).
But what do I know? I’m just some loon screaming into the wind.
Although I agree with your view there is one aspect you aren't considering - Bitcoin is currently backed by a mining network that is managing to achieve around 200 Exahashes/second or however they measure it. A big number.
While at a theoretical level different crypto tokens are the same that will not be how the market plays out. That sort of computing power isn't easily replaced and while it exists Bitcoin is unique. So it does have value at the moment, but the value is not inherent in the protocol.
'Need' doesn't really come in to it, Bitcoin doesn't need that much power. But from a raw value perspective, Bitcoin has something that the other cryptos do not have - a massive network of computing power. That means bitcoins and other crypto currencies can't be simply swapped for each other. Bitcoin is different, for now.
I've heard this argument, but there's no utility value whatsoever to that power, or the energy consumed to run the hashes (in that the energy and hashing power is spent on the mining task and therefore unavailable for other uses).
The argument is essentially that the computing and hashing power has intrinsic value for other use cases it could be reapplied to if not doing this. It could, but that value would accrue to the person selling the energy and/or the hardware, not whoever held the token at that time.
The "Networks behind them" are also worthless, if you mean blockchain.
Consider the oracle problem, the fact that running Hello World requires mining a block, that software contains errors and cannot be patched on the blockchain, the curious absence of real world applications of blockchain after all those years, and the inevitable precedence of the Law in the real world that makes any "the code is the law" ideas moot...
A complicated, hard to understand scheme like blockchain is just the right thing to keep the crypto hype going and to attract more of that money that is looking for investment opportunities in this world of overvalued assets and low-interest rates.
This defeats the core idea of having something immutable, that no one can mess with. If you can agree to roll out a new version, why not do it with regular software?
No it does not. Immutable for use doesn't mean it cannot change for example if the title of your house is on the blockchain when you sell it a new immutable transaction referencing your original immutable transaction would be created. Same as rolling out a new version of log4j
Adding a new transaction in a new block (e.g. for a house sale transaction) is different from undoing software issues (log4j, the "DAO hack" on Ethereum). The former is problematic due to the oracle problem, the latter invalidates the concept of the blockchain entirely; it means I could lose the house because a mining/staking majority, or a vocal group on the Ethereum subreddit agreed to "fix" something on the existing blockchain. That such a sacrilegious thing was allowed to happen is evidence that no one cares except to get rich through the coins they got early (or launched themselves).
(Of course there are many more ways I could lose a house that's ledgered on a blockchain, one thing I missed earlier: The impossibility for an individual to operationally secure the secrets for the crypto scheme against theft or loss.)
Why would you not need to update it when bugs are found? If you don't then your blockchain and everything on it could be rendered worthless, depending on the bug. A blockchain is just regular software and this software changes over time.
I used the term “networks” and not blockchain purposefully. I wanted to mean that having thousands of decentralized nodes with such computing power is astounding. The blockchain technology is cool but I also believe it won’t be a revolution on par with the Internet let’s say. If there is one legacy I hope we have once all cryptos have gone to zero is a reliable, trustless and decentralized network to run important stuff.
Crypto has “crashed” 50% and more multiple times and has survived so far.
If the value goes down the network decreases difficulty of mining so it is cheaper to mine (remember these things started being worth nothing). This also decreases economic security though, we should find some combination of what security is adequate and that will be represented in the tokens.
Let’s not end up in that sad authoritarian cbdc future, instead we can build and adopt global foss systems like the ones we’ve been building the past decade. Or we could ignore it all, call it a scam, and let it be captured by VCs and governments.
Everything is worthless in itself. We give value to things subjectively and mediate this valuation through intersubjective consensus mechanisms. I'm glad that now we are in a position where a personal decision and valuation really counts, this is why I'm only taking web3 related jobs from now on.
Everything that doesn't serve a human basic need, of which there are many. Food is not worthless in itself, nor is shelter, security, human contact, etc.
Extreme subjectivism never fed nobody nor kept them worm. It only made them think they are smart.
You don't understand what in itself means, it is a philosophical term used to distinguish between being in itself of something versus being of that for someone. For example there is no food in itself, food is always food for an animal in itself its just some matter. In the same way there is no value inherent in anything as it is in itself, but becomes valued by humans on the basis of speculation, use and rarity.
You keep using words you don't seem to understand, I'm sure you mean to draw an analogy, but do it, draw it, stop just implying - thats the worst for any kind of dialogue.
This is a horrible misreading of Kantian TI. The idea of "value" is what's worthless in itself, not objects or entities. Yes, everything is worthless in itself, but that says more about "worth" than it does about "everything", and it isn't mutually exclusive with there being things in the world that are required for human life. Value at the bottom end takes its shape from these things, and in the top end, like complex financial derivatives, is far removed from human necessities.
You're missing that we can get really close to things-in-themselves. It's like you got an erection as soon as you read that we were fundamentally separate from things-in-themselves, and just ran with it.
It can't be a 'horrible misreading of Kantian TI' because it isn't a reading of Kantian TI, in itself as distinguished from for itself and for others is a standard concept in philosophy since Kant and part of common sense language.
My point is just that value isn't some simple natural thing that you could consider as a positive fact, like you are trying to do. Value doesn't 'take its 'shape' (whatever that would mean) from necessities of human life', and has no immediate special relation to necessities.
If one assumes the content is sarcastic, it’s trying to point out that hey all these incredible big and successful entities support it so it can’t be worthless.
Problem is that if you’ve been alive awhile you’ve seen situations over and over and over again where things that important institutions valued very highly did in fact turn out to be worthless.
Money is hard to value. Fundamentally, it relies on a consensus that it's useful and valuable, but there's nothing inherent in money that makes it that way. It's a useful collective hallucination.
So is crypto. Some people came up with a collective hallucination that they considered useful and valuable, and convinced some other people that it was, because, hey, we all like valuable things, especially when we can create them out of thin air and sell them to people for other shiny things that we like.
>> there's nothing inherent in money that makes it that way
> Yes there is. Typically money is legal tender ...
Parent comment was right, subjective value thesis says people will value things (including money) differently.
And legal tender laws are only "typical" of government coercion in the central bank era, basically the past century or so. Prior to that the king or the local sovereign may have required taxes paid in his coin, but multiple monies circulated and people freely chose which ones to spend, save, accept, or not.
There is a quote, attributed to Mark Twain and others, which can be adapted to Crypto Currency.
A mine is a hole in the ground. The discoverer of it is a natural liar. The hole in the ground and the liar combine and issue shares and trap fools.—Detroit Free Press.
https://quoteinvestigator.com/2015/07/19/gold-mine/
And as applied to Crypto Currency:-
A crypto currency is a hole in the air. The discoverer of it is a natural liar. The hole in the air and the liar combine and issue shares and trap fools.
I believe shares exist to raise capital to exploit a natural resource in this case. But if I already have a profitable mine, I doubt I'd have much incentive to invite others to share ownership of that mine. However, if I have a hole in the ground that doesn't produce anything of value, then it's in my interest to sell shares of it since that might be my only income.
Just a thought really - in spite of hearing many good Twain quotes in my life, this was a new one to me, so I'm kind of working through it.
Selling shares hedges your risk. Investors are also trying to hedge theirs. That's all it is, a tool to hedge risks. When it's not based in reality it's speculation a.k.a. gambling.
> if I already have a profitable mine, I doubt I'd have much incentive to invite others to share ownership of that mine
"Profit" isn't binary, it's an amount of capital that may or may not be enough to invest in things that are likely to increase your profits even more. If you need extra capital to increase your profits, would you as the owner rather wait 20 years and pay for the investments yourself, or share the profits right now and take less risk?
Shares aren't a scam, it's just a pitch for investing. It's a risk/reward presentation that investors can choose to buy if they want. When companies issue shares they're saying "we could use some more money, have a look at our business and if it makes sense, buy some". There's nothing remotely dubious about it, and there are many legitimate situations where a company requires more capital despite being profitable.
Few mines start and go to full production without outside venture cash = you sell shares, lose part of the control, but use their money to ramp up production.
It depends on what you want to do. Bootstrapping from a zero start needs after tax $$. As you start digging you start to sell metals and also pay your taxes, so the ramp up is slowed by the taxes. You can sell $10,000,000 in shares, so now have $10 million and the investor has some paper shares. No taxes are due yet, but you can build a $10 million mine and be in production and make $10 million annually for 60 years, It might cost $3 million for all costs = $7 million profit x 28% taxes ~~= $2 million in taxes and $5 million to divvy up with the shareholders, each and every year for 60 years = you choose.
There are venture capitalists for mining IPO's as well as Wall Street IPO's.
You pick what you know best.
Mining is an area with a very high riskware ratio. 100 years ago, mines were found by surface prospecting. You mind some ore, be it gold, silver, copper, zinc. and you dig a hole and manually remove the ore. You have seen the old movies with the
quintessential bearded prospector. Back in those days a lot of land was state/federal/crown land. You could get a prospectors licence and stake land. This consists of placing a number of wooden stakes in a more or less North-South grid, with you name date and licence number - which was then filed with the relevant government. That gave you the right to exclude others and explore the claims for minerals for 2 years, after which it could be renewed for an additional fee and you also had to file a geologists report on the work you did of a certain minimum value. You could keep doing this and if you had a potential mine, you could ask for a mining lease, and if granted take bulk samples or did a mine - usually by rock blasting in hard rock, but could also be with a grader if you mined aluminum bauxite.
about 1 in a 100 surface prospects end up in a mine. Mines can be immensely profitable.
A case in point.
Foran Mining was 12 cents 2 years ago. (https://foranmining.com/)Since then their copper/zinc/gold mine has drilled and proven 40 million tonnes of ore, and it looks as if it will end up between 60 and 80 million tons. This mine will last for 50-60 years and then it will be a worthless hole in the ground. Once in production in 3 years it will head for $40-50 per share from the current $2.50
So 100 holes = 1 mine. That can be 99 crooks and one good prospector, or even 100 good honest prospectors, of which one was lucky and 99 not so much.
The truth is mines are very profitable, and the trick is to find one. Modern mine discovery is driven by geophysics, since most of the rich surface showings have been found in hard rock areas. Over the next 2-3 years Foran will start producing Copper, Zinc and gold for the next ~~ 60 years and will reward investors well and will pay a cash dividend for ~~60 years...
Bitcoin is massively, overwhelmingly manipulated by a very small number of actors. The price is a complete fantasy, and exists mostly to transfer money from new investors to those manipulators, and bitcoin miners.
There is a lot of money going in. There will not be a lot of money coming out. The money is gone.
There is, of course, no simple guide you can follow to learn all about it, that's kind of the point of scams. You have to keep your ear to the ground and follow what's going on.
But, https://archive.md/DfAwG is a pretty good hint among many. And certainly look at what's going on with Tether.
I’m not exactly a proponent of crypto currencies, but this description seems like it holds true for any currency in the world, regardless of whether it’s crypto, fiat or natural. It’s not like you can carry dollars or a nugget of gold and expect any human being anywhere in the world to accept it as legal tender, and as long as that is true every type of payment is dependent on a “casino”, they just vary in size.
There are this things called "Exchanges" in every airport in the world.
With the US dollar, Euro and some others, the world is your casino (following the comparison) and you can trade all of them. Same with gold and silver (although this are a bit harder to trade).
Hell, try to pay a taxi in Djibouti, Sao Paolo or Islamabad with a BTC or USD and see which they'll accept and which will get you kicked out.
> try to pay a taxi in Djibouti, Sao Paolo or Islamabad with a BTC or USD and see which they'll accept and which will get you kicked out.
Even though the "merchant adoption" meme is the least interesting part of any asset, currency or potential payment method, the question is where does the goal post move when you can do that? Can you give us a preview of what your next goal post is?
I mean that’s the definition of currency not really moving the goal post: store of value, unit of account and mean of exchange. At this point, I am not sure bitcoin even ticks one.
It’s an asset with a volatile price. It is not a currency.
There's no need to be snarky, I know perfectly well that exchanges exist which isn't contrary to what I wrote in any way. I said:
> every type of payment is dependent on a “casino”, they just vary in size
So yes, in general terms it's easier to pay with USD than BTC because the “casino” is larger. That's exactly what I wrote. The point is that you cannot carry only USD and expect to be able to pay with it anywhere in the world, just as you cannot carry BTC or silver bars anywhere and expect to be able to pay with them. “The world” is most definitely not your casino with cash USD, EUR or any other major currency if you are not in an area of the world where they are commonly accepted.
And as with any other casino, the house is the only consistent and long-term winner. People bringing in the real money are just suckers, even if they score once in a blue moon. And since there is no actual value attached, every win requires an equal amount of loss elsewhere.
Because valuation is easy only near equilibria; in old stale markets where the profit rates have dried up, innovation is over and an oligopoly has been established.
In all cases people are rather reserved about it, if not outright hostile. I think it is because many on HN have a lot of technical experience and can immediately see that normal databases can do everything blockchains can at a fraction of the cost except the whole trustless thing, while everything interfacing with the real world (ie everything not a currency) will involve a lot of trust anyway. Someone has to enter the data into the oracles, for example.
Crypto is not hard to value. Valuation is the estimation of the present value of future free cash flows. Since most crypto tokens produce negligible free cash flows relative to their market cap, they have approximately zero intrinsic value relative to their market price.
> Since most crypto tokens produce negligible free cash flows relative to their market cap, they have approximately zero intrinsic value relative to their market price.
What's the intrinsic value of stocks that don't distribute dividends in this model?
The simple answer is that if a stock is expected to never pay any dividends, it's intrinsic value is zero.
Note that from shareholders' perspective, paying dividends is economically equivalent to share buyback, plus some tax considerations, so there are exceptions.
> The simple answer is that if a stock is expected to never pay any dividends, it's intrinsic value is zero.
Which is obviously wrong, right? Any company that has liquid assets (and no debt) is at least worth the selling value of these assets, even if it doesn't pay dividends. So I'm not sure your model helps here.
You don’t value the cash-flows associated with the share. A share is not an abstract financial product. It is direct ownership of a company.
You value the company and then you can divide the price by the total number of shares if you want. Apart from some rare exceptions like Amazon in its first years, a company which doesn’t generate any cash-flows is soon to be an ex-company.
Dividends muddy the water a bit but you get the general idea.
> Valuation is the estimation of the present value of future free cash flows.
That’s only DCF valuation. It is not the be all and all of valuation. DCF is a way to value perpetuity. It makes sense for assets you can assimilate to a perpetuity (like a company). It makes no sense if you can’t. The easiest counter examples are raw materials and currencies.
Most "cryptos" are just affinity scams riding on the coattails of the true innovation of Bitcoin. They offer nothing significantly new or important over Bitcoin. Most people in the space understand this and why. Institutional investors starting to come in understand this. State governments are starting to understand this. The energy sector is starting to understand this.
Yes crypto is a bubble, and it will pop. When it does Bitcoin will likely get dragged down with it for a while, but at the end of the day it will be one of the few left standing.
Save yourself time, money, and effort. Ignore all other cryptos, and just buy Bitcoin (i.e. dollar cost average), and hold it for 4+ years.
This is the funny thing about Bitcoin. Once you've researched it sufficiently you are compelled to buy some because you understand the fundamentals of its value proposition.
But then critics will point out that you own Bitcoin so you're now clearly biased because you have skin in the game.
I guess you could call it the Bitcoin paradox, or the Catch-22 of Bitcoin?
Once you understand it you buy it, but now no one will listen to you about it because you're "compromised".
There's nothing I can do about that other than to suggest you look into it further if you're curious.
Bitcoin can even be a base layer for decentralized autonomous organizations (DAO)s. Take a look at bisq's DAO, built directly on top of bitcoin by using colored bitcoin for its BSQ governance token. Its been operating and paying for the software development (and project management and customer support) for bisq for over a year and a half. See https://bisq.network/dao/ for details.
Tbh Bitcoin does nothing interesting compared to say Ethereum. I think Ethereum is a far more interesting ecosystem when you consider the only cryptocurrency CoinBase runs is built on top of Ethereum. Bitcoin is the most boring coin and its only valued so much based on speculation and brand recognition.
The problem is at ethereum is a science project. I have no guarantees that the thing will even work next year. Proof of Stake is a mistake. Who knows if it will ever be able to change. The chain is too expensive to use. EVM alternatives exist and will eventually out perform it for number tx’s. You can clone ethereum (EVM).
Bitcoin is mature, stable, has a known economic model and will absolutely work perfectly in a year, and beyond. It is cheap to send funds. It cannot be cloned and will be the best, proof of work, forever.
Did you know that 70% of eth was made out of nothing? Back in the day we would call it a Premined scam.
You don't understand Bitcoin, or Ethereum for that matter.
Ethereum is a product produced by a company. They have an enormous about of control over it. They've changed the token issuance multiple times over its lifetime. Vitalik being a figurehead is also a problem. There's a lot of risk of what happens to the project when Vitalik leaves or dies.
Bitcoin suffers from none of those problems. The issuance has been fixed for 13 years. Any attempts to change important parameters of the consensus rules have failed. The figurehead of the project left years ago when Bitcoin was still small and hasn't been heard from since.
Ethereum and all other alts are products sold by companies.
Bitcoin is simply an open protocol, owned by no one, and yet accessible to anyone. There is no CEO, marketing department, legal team or anything like that. It's just open-source software that people choose to run.
It's similar to email, but instead of sending messages, you can send absolutely scarce "tokens".
It's a subtle difference, but it is vitally important.
> Bitcoin is the most boring coin
Good. Would you really want a new form of money to be "dynamic" and constantly changing? Bitcoin being predictable is a feature. Certainty of issuance so you can't be arbitrarily diluted at the whims of a select few.
> its only valued so much based on speculation and brand recognition
There's a lot more value to Bitcoin than that.
* It's significantly decentralised so it can't be shut down in any practical way
* It can't be easily confisicated if secured correctly. This is important for people living in authoritarian regimes where bank accounts can be easily shut down
* It's permissionless. Anyone can use it, and no one can stop someone from using it
* It's accessible. You just need an internet connection to use the Bitcoin network. Think about what this means for countries with a large portion of unbanked people or currencies that are unstable... yet they have internet and mobile phones
* The Bitcoin network is an always available consumer of energy. This is a game changer for the energy sector because they can recoup lost revenue from excess power
* It's also a non-competitive consumer of stranded energy i.e. energy that can't be transmitted to where people are
You mention brand recognition almost as a bad thing, but network effects are important and powerful... particularly for open networks like Bitcoin.
Value is defined by the expected return on investment or equity.
Since there is none in crypto, you're essentially buying into Monopoly money, with the assumption that it's going to get more popular and not less popular or disappear over time.
But make no mistake, to some people it's everything, to others it's a fartcicle. So it's roughly worth between nothing and what you can find an idiot willing to pay for it.
You value Bitcoin like every other currency, like US dollar or Turkish lira. However, you have to go back in history to learn what happens when multiple currencies compete in a free market (gold, silver, copper, etc.). People typically want to save the money which has the lowest expected dilution and get rid of all other forms of money. On top of that, people want to save the money which everyone else is saving. You can't predict the value, but you can predict the direction where wealth is flowing.
value investing is dead, it’s an attention economy now. the ability for global scale herds of people to coordinate in real time has changed the balance and changed the game
The stock market is certainly behaving this way recently. The RobinHooders and WSB folks are having a hay day right now, but once the big money decides to start changing the game again, they will win.
Simple answer: because it has no fundamental value. Crypto is not an equity or a claim of ownership. Thus the value is solely determined by market speculation. Gambling in crypto may be profitable but it is not an "investment."
Sure there is fundamental value of an asset. It is at least the present value of the expected income stream generated for the asset over its lifetime. Cryptocurrencies do not have an income stream so they can not have a fundamental value.
The value of any asset is zero if nobody is buying it. If that asset happens to be shares in a company making a profit for example, that means that the risk of nobody wanting to buy it (at any price) is practically non-existent in a real world scenario, sure, but that doesn't mean it has some magical, inherent value disconnected from the market.
By your definition no currency in the world has any fundamental value, so what is then the point of even talking about it when discussing crypto currencies?
But what's easy to value is public pensions. Do the existing reserves and projected inflows match the liabilities? Of course not, they are underwater by trillions of dollars. How will fifty very different state governments and the federal government distribute these losses? Impossible to say, because different factions are already lining up different schemes with vastly different outcomes.
In contrast, we already know exactly how bitcoin works presently and how it works in the future. It's right there in the cpp file. It doesn't matter who the Senator from California is, it doesn't matter who is the chairman of the Fed is.
So bitcoin competes with other currencies by being a system with transparent and predictable behavior. Meanwhile the current dollar system - which is valuable precisely because the government always meets its obligations - is being valued by pretty much just ignoring all its underfunded obligations in the hope that some unknown solution will be arranged when it becomes a crisis.
To tie these findings back to the concept of financial "valuation", I think the author elides the role that predictability plays in it. And specifically overestimates the predictability of status quo at a time length of five to thirty years.
I don’t mean to sound tongue in cheek, but claiming that “predictability” is one of the major benefits of crypto currencies seems like a very rose-tinted way of describing how they behave in real life.
Agreed. Crypto is risky and volatile, and can go to zero and that makes it difficult for the average person to treat it as a savings vehicle. The distinction in predictability between the two system is kind of subtle:
In bitcoin, the internal system mechanics are highly predictable. But there's no external "Open Market Committee" (e.g FOMC) that will change the market price to hit the targets mandated by its stakeholders.
In dollars, the internal system is becoming more unpredictable, while there are numerous external systems (e.g. bailouts, QEx, etc) which are very predictable: they will act to make sure the economic tradeoffs shield the voters of the system from experiencing pain to the next election cycle.
>So bitcoin competes with other currencies by being a system with transparent and predictable behavior
There's no reason to believe that the crypto ecosystem is 100% secure. Any security vulnerability could destroy the value of the entire market. Not to mention that the crypto ecosystem is unable to use force.
This is a good point - that we trade political risk for technical risk, e.g. will sha256 be broken, will quantum computing break ECC, or will a well funded actor launch a 51% attack or empty block attack on the network. These are the big known-unknowns.
In these cases, ideally a hard fork would be able to maneuver the network out of the way of the technical vulnerability in time.
Less ideally, there's just the fact that crypto protocols are now so diversified in terms of hashing algos, PoW algos, and alternative consensus mechanisms (e.g PoS, zk's, etc), active chains, and governance models, that successfully knocking out the majority of them, nevermind all of them, would be almost impossible. But this is obviously less than ideal in that now you have an even more complex situation: where you are constantly hedging your savings in multiple tokens, and how do you value one versus the other? Simply in its blue-horizon cryptographic development threat model? popularity? ease of use?
>the crypto ecosystem is unable to use force.
I'd argue the crypto ecosystem has been building "soft power" with web3. To the extant one would argue "it's a scam" is directly proportional to the success of its "propaganda" agencies.
It's the big unknown-unknowns that are the problem. Is there a relatively simple implementation bug that hasn't yet been discovered in the biggest projects? They're all less than 12 years old at this point, it's entirely probable that they include 0-day vulnerabilities that are undiscovered.
That's enough to destroy the whole thing. One single 0-day, exploited slowly over the course of a week. It's not like the transactions can be reversed, so all of that value would have been reassigned to the exploiter.
No government is insuring balances in any of these projects - so a single shock will (rightly) shake all of these holders back out again.
Maybe there are a few people who use crypto as real investment but the vast majority is just gambling or FOMO. What actual uses does crypto have other than waiting for it to increase “value”? I bought some magic mushroom spores with BTC but that was the only time I ever used it.
We will see if eventually there will be real use cases but it seems that’s far in the future.
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[ 2.6 ms ] story [ 245 ms ] threadThe problem comes when people mistake one for another.
IOW, buying a bunch of screwdrivers isn't a great retirement strategy.
Most people would have stopped caring about quality, and instead started caring about cheap utility. "It's good enough."
However self custody ensures they can never get it even if they kill you, and since it is programmable money there is a way to ensure it gets to a friendly address, maybe years later, perhaps to a loved one.
Seems the market places a worth on a possession that can not be taken from you by force, or even by your death, slightly more than 0.
For fun, the number of times I saw "you're posting too fast" trying to post this completely obvious and indisputable comment: 12. I'm not actually posting too fast, I'm just in the HN doghouse for posting comments that irritate its most delusional members.
Bitcoin is a form of money.
It's like HTTP/HTTPS vs IPv4/IPv6. Bitcoin operates at a lower level than stocks, looking at it from that perspective is like looking at the facebook home page and trying to understand the value of IPv6.
Investing/speculating is all about increasing a counter. Here we are talking about another separate counter.
With the expectation of increasing the counter.
Exactly my point.
In general crypto is freely tradable / sellable, and the markets/tools are there. Illiquid 'assets' are a lot more liquid than when hidden / on paper somewhere.
Want the crypto to represent shares in a company? They're worth that.
Want an NFT to represent the ownership or the beneficiary of the profits of some music/IP? Can be worth millions or 0. Depending on the success of that IP.
Want to notarize something on a public blockchain for future proof / timestamping? Probably worth about $500-$2000 or whatever your notary charges.
Want the crypto to represent karma points on hackernews? Priceless!
Crypto (despite claims that it's a currency) is a digital "asset". Like gold, but without any real-world use like jewellery, coatings, etc, and with a far shorter history of being a store of value. The problem with valuing it then is due to assessing risk.
It could be trading at zero tomorrow, and there are plenty of plausible paths to that scenario.
So the blockchain doesn't have intrinsic value because the crypto currency doesn't have intrinsic value.
Utility, for many use cases, it does have.
In real terms it’s worth whatever the next buyer is willing to pay. It annoys me that people cite the run-up over the last decade as evidence of it’s brilliance when it’s nothing of the sort, but I’d just sound like a loon screaming into the wind.
Personally I think it’s worthless. Honestly I suspect Satoshi Nakamoto (if they’re still alive) probably thinks the same; One of the later posts Satoshi made before disappearing was making the point that if it accrued any value at all then it would be useable to transact and therefore viable.
The problem is that if that’s true of Bitcoin, it’s also true of all tokens, meaning the scarcity argument is entirely imaginary - if one token is perceived as too expensive then the perception of value will shift to another that’s viewed as ”cheaper” (and thus more likely to “mooon!”), meaning the supply of tokens taken as a whole is actually infinite and arbitrary, rather than scarce, and the value of the cryptocurrency market as a whole is therefore infinitely and arbitrarily small per unit (i.e. worthless).
But what do I know? I’m just some loon screaming into the wind.
Yes, that's how scams and con games are played too. I personally can't tell the difference between a cryptocurrency and the classic gold brick scam.
While at a theoretical level different crypto tokens are the same that will not be how the market plays out. That sort of computing power isn't easily replaced and while it exists Bitcoin is unique. So it does have value at the moment, but the value is not inherent in the protocol.
The argument is essentially that the computing and hashing power has intrinsic value for other use cases it could be reapplied to if not doing this. It could, but that value would accrue to the person selling the energy and/or the hardware, not whoever held the token at that time.
Consider the oracle problem, the fact that running Hello World requires mining a block, that software contains errors and cannot be patched on the blockchain, the curious absence of real world applications of blockchain after all those years, and the inevitable precedence of the Law in the real world that makes any "the code is the law" ideas moot...
A complicated, hard to understand scheme like blockchain is just the right thing to keep the crypto hype going and to attract more of that money that is looking for investment opportunities in this world of overvalued assets and low-interest rates.
(Of course there are many more ways I could lose a house that's ledgered on a blockchain, one thing I missed earlier: The impossibility for an individual to operationally secure the secrets for the crypto scheme against theft or loss.)
Weirdly, that seems worse than having just lawyers.
If the value goes down the network decreases difficulty of mining so it is cheaper to mine (remember these things started being worth nothing). This also decreases economic security though, we should find some combination of what security is adequate and that will be represented in the tokens.
Let’s not end up in that sad authoritarian cbdc future, instead we can build and adopt global foss systems like the ones we’ve been building the past decade. Or we could ignore it all, call it a scam, and let it be captured by VCs and governments.
And you can take a guess of which cryptocurrencies are going to be the ones powering these CBDCs?
Stellar [0], and XRP [1].
The other useless cryptocurrencies with no other use cases such as the memecoins, meme tokens, etc will wither away.
[0] https://resources.stellar.org/stellar-for-cbdcs
[1] https://ripple.com/insights/ripple-joins-the-digital-pound-f...
Extreme subjectivism never fed nobody nor kept them worm. It only made them think they are smart.
Solipsism 2.0
You're missing that we can get really close to things-in-themselves. It's like you got an erection as soon as you read that we were fundamentally separate from things-in-themselves, and just ran with it.
My point is just that value isn't some simple natural thing that you could consider as a positive fact, like you are trying to do. Value doesn't 'take its 'shape' (whatever that would mean) from necessities of human life', and has no immediate special relation to necessities.
Nonetheless, to the extent that you are being serious and not sarcastic, I largely agree with you.
Problem is that if you’ve been alive awhile you’ve seen situations over and over and over again where things that important institutions valued very highly did in fact turn out to be worthless.
(And it's a bit ironic to see crypto enthusiasts place so much weight on the opinion of the largest players in the traditional financial system!)
So is crypto. Some people came up with a collective hallucination that they considered useful and valuable, and convinced some other people that it was, because, hey, we all like valuable things, especially when we can create them out of thin air and sell them to people for other shiny things that we like.
Yes there is. Typically money is legal tender, which means you’re mandated to accept it by a government with large numbers of guns and prison cells.
That’s what for all debts public and private means.
> Yes there is. Typically money is legal tender ...
Parent comment was right, subjective value thesis says people will value things (including money) differently.
And legal tender laws are only "typical" of government coercion in the central bank era, basically the past century or so. Prior to that the king or the local sovereign may have required taxes paid in his coin, but multiple monies circulated and people freely chose which ones to spend, save, accept, or not.
And were routinely scammed out of their savings as a result, it should be noted.
For a global economy, we need a global currency, and USD/EUR have been the closest thing to that so far.
Of course you can only do a valuation on cash producing assets. Non-cash producing assets can only be priced.
That obviously does not mean that gold, oil, crypto, art, any highly demanded collectible have a price of zero.
Might want to look up Aswath Damodaran's youtube videos on this very subject to have a clue.
"A Viral Market Update III: Price vs Value"
A mine is a hole in the ground. The discoverer of it is a natural liar. The hole in the ground and the liar combine and issue shares and trap fools.—Detroit Free Press. https://quoteinvestigator.com/2015/07/19/gold-mine/
And as applied to Crypto Currency:- A crypto currency is a hole in the air. The discoverer of it is a natural liar. The hole in the air and the liar combine and issue shares and trap fools.
Just a thought really - in spite of hearing many good Twain quotes in my life, this was a new one to me, so I'm kind of working through it.
"Profit" isn't binary, it's an amount of capital that may or may not be enough to invest in things that are likely to increase your profits even more. If you need extra capital to increase your profits, would you as the owner rather wait 20 years and pay for the investments yourself, or share the profits right now and take less risk?
Shares aren't a scam, it's just a pitch for investing. It's a risk/reward presentation that investors can choose to buy if they want. When companies issue shares they're saying "we could use some more money, have a look at our business and if it makes sense, buy some". There's nothing remotely dubious about it, and there are many legitimate situations where a company requires more capital despite being profitable.
The truth is mines are very profitable, and the trick is to find one. Modern mine discovery is driven by geophysics, since most of the rich surface showings have been found in hard rock areas. Over the next 2-3 years Foran will start producing Copper, Zinc and gold for the next ~~ 60 years and will reward investors well and will pay a cash dividend for ~~60 years...
There is a lot of money going in. There will not be a lot of money coming out. The money is gone.
But, https://archive.md/DfAwG is a pretty good hint among many. And certainly look at what's going on with Tether.
As a poker investor, why is this off suit King Jack from the button so hard to value?
And so on.
With the US dollar, Euro and some others, the world is your casino (following the comparison) and you can trade all of them. Same with gold and silver (although this are a bit harder to trade).
Hell, try to pay a taxi in Djibouti, Sao Paolo or Islamabad with a BTC or USD and see which they'll accept and which will get you kicked out.
Even though the "merchant adoption" meme is the least interesting part of any asset, currency or potential payment method, the question is where does the goal post move when you can do that? Can you give us a preview of what your next goal post is?
It’s an asset with a volatile price. It is not a currency.
But yes, I agree with you about BTC.
> every type of payment is dependent on a “casino”, they just vary in size
So yes, in general terms it's easier to pay with USD than BTC because the “casino” is larger. That's exactly what I wrote. The point is that you cannot carry only USD and expect to be able to pay with it anywhere in the world, just as you cannot carry BTC or silver bars anywhere and expect to be able to pay with them. “The world” is most definitely not your casino with cash USD, EUR or any other major currency if you are not in an area of the world where they are commonly accepted.
Does that shift seem recognisable to others? If correct, what's the drastic change driven from?
Edit: spelling
In all cases people are rather reserved about it, if not outright hostile. I think it is because many on HN have a lot of technical experience and can immediately see that normal databases can do everything blockchains can at a fraction of the cost except the whole trustless thing, while everything interfacing with the real world (ie everything not a currency) will involve a lot of trust anyway. Someone has to enter the data into the oracles, for example.
What's the intrinsic value of stocks that don't distribute dividends in this model?
Note that from shareholders' perspective, paying dividends is economically equivalent to share buyback, plus some tax considerations, so there are exceptions.
Which is obviously wrong, right? Any company that has liquid assets (and no debt) is at least worth the selling value of these assets, even if it doesn't pay dividends. So I'm not sure your model helps here.
You value the company and then you can divide the price by the total number of shares if you want. Apart from some rare exceptions like Amazon in its first years, a company which doesn’t generate any cash-flows is soon to be an ex-company.
Dividends muddy the water a bit but you get the general idea.
That’s only DCF valuation. It is not the be all and all of valuation. DCF is a way to value perpetuity. It makes sense for assets you can assimilate to a perpetuity (like a company). It makes no sense if you can’t. The easiest counter examples are raw materials and currencies.
Yes crypto is a bubble, and it will pop. When it does Bitcoin will likely get dragged down with it for a while, but at the end of the day it will be one of the few left standing.
Save yourself time, money, and effort. Ignore all other cryptos, and just buy Bitcoin (i.e. dollar cost average), and hold it for 4+ years.
This is the funny thing about Bitcoin. Once you've researched it sufficiently you are compelled to buy some because you understand the fundamentals of its value proposition.
But then critics will point out that you own Bitcoin so you're now clearly biased because you have skin in the game.
I guess you could call it the Bitcoin paradox, or the Catch-22 of Bitcoin?
Once you understand it you buy it, but now no one will listen to you about it because you're "compromised".
There's nothing I can do about that other than to suggest you look into it further if you're curious.
Bitcoin is mature, stable, has a known economic model and will absolutely work perfectly in a year, and beyond. It is cheap to send funds. It cannot be cloned and will be the best, proof of work, forever.
Did you know that 70% of eth was made out of nothing? Back in the day we would call it a Premined scam.
Ethereum is a product produced by a company. They have an enormous about of control over it. They've changed the token issuance multiple times over its lifetime. Vitalik being a figurehead is also a problem. There's a lot of risk of what happens to the project when Vitalik leaves or dies.
Bitcoin suffers from none of those problems. The issuance has been fixed for 13 years. Any attempts to change important parameters of the consensus rules have failed. The figurehead of the project left years ago when Bitcoin was still small and hasn't been heard from since.
Ethereum and all other alts are products sold by companies.
Bitcoin is simply an open protocol, owned by no one, and yet accessible to anyone. There is no CEO, marketing department, legal team or anything like that. It's just open-source software that people choose to run.
It's similar to email, but instead of sending messages, you can send absolutely scarce "tokens".
It's a subtle difference, but it is vitally important.
> Bitcoin is the most boring coin
Good. Would you really want a new form of money to be "dynamic" and constantly changing? Bitcoin being predictable is a feature. Certainty of issuance so you can't be arbitrarily diluted at the whims of a select few.
> its only valued so much based on speculation and brand recognition
There's a lot more value to Bitcoin than that.
* It's significantly decentralised so it can't be shut down in any practical way
* It can't be easily confisicated if secured correctly. This is important for people living in authoritarian regimes where bank accounts can be easily shut down
* It's permissionless. Anyone can use it, and no one can stop someone from using it
* It's accessible. You just need an internet connection to use the Bitcoin network. Think about what this means for countries with a large portion of unbanked people or currencies that are unstable... yet they have internet and mobile phones
* The Bitcoin network is an always available consumer of energy. This is a game changer for the energy sector because they can recoup lost revenue from excess power
* It's also a non-competitive consumer of stranded energy i.e. energy that can't be transmitted to where people are
You mention brand recognition almost as a bad thing, but network effects are important and powerful... particularly for open networks like Bitcoin.
Since there is none in crypto, you're essentially buying into Monopoly money, with the assumption that it's going to get more popular and not less popular or disappear over time.
But make no mistake, to some people it's everything, to others it's a fartcicle. So it's roughly worth between nothing and what you can find an idiot willing to pay for it.
By your definition no currency in the world has any fundamental value, so what is then the point of even talking about it when discussing crypto currencies?
In contrast, we already know exactly how bitcoin works presently and how it works in the future. It's right there in the cpp file. It doesn't matter who the Senator from California is, it doesn't matter who is the chairman of the Fed is.
So bitcoin competes with other currencies by being a system with transparent and predictable behavior. Meanwhile the current dollar system - which is valuable precisely because the government always meets its obligations - is being valued by pretty much just ignoring all its underfunded obligations in the hope that some unknown solution will be arranged when it becomes a crisis.
To tie these findings back to the concept of financial "valuation", I think the author elides the role that predictability plays in it. And specifically overestimates the predictability of status quo at a time length of five to thirty years.
In bitcoin, the internal system mechanics are highly predictable. But there's no external "Open Market Committee" (e.g FOMC) that will change the market price to hit the targets mandated by its stakeholders.
In dollars, the internal system is becoming more unpredictable, while there are numerous external systems (e.g. bailouts, QEx, etc) which are very predictable: they will act to make sure the economic tradeoffs shield the voters of the system from experiencing pain to the next election cycle.
Neither seems ideal in its present form.
On January 1, 2028 how much M2 money supply is there? 10% more? 10% less? 100% more? 1,000% more? It completely depends on who is influencing it.
There's no reason to believe that the crypto ecosystem is 100% secure. Any security vulnerability could destroy the value of the entire market. Not to mention that the crypto ecosystem is unable to use force.
In these cases, ideally a hard fork would be able to maneuver the network out of the way of the technical vulnerability in time.
Less ideally, there's just the fact that crypto protocols are now so diversified in terms of hashing algos, PoW algos, and alternative consensus mechanisms (e.g PoS, zk's, etc), active chains, and governance models, that successfully knocking out the majority of them, nevermind all of them, would be almost impossible. But this is obviously less than ideal in that now you have an even more complex situation: where you are constantly hedging your savings in multiple tokens, and how do you value one versus the other? Simply in its blue-horizon cryptographic development threat model? popularity? ease of use?
>the crypto ecosystem is unable to use force.
I'd argue the crypto ecosystem has been building "soft power" with web3. To the extant one would argue "it's a scam" is directly proportional to the success of its "propaganda" agencies.
It's the big unknown-unknowns that are the problem. Is there a relatively simple implementation bug that hasn't yet been discovered in the biggest projects? They're all less than 12 years old at this point, it's entirely probable that they include 0-day vulnerabilities that are undiscovered.
That's enough to destroy the whole thing. One single 0-day, exploited slowly over the course of a week. It's not like the transactions can be reversed, so all of that value would have been reassigned to the exploiter.
No government is insuring balances in any of these projects - so a single shock will (rightly) shake all of these holders back out again.
We will see if eventually there will be real use cases but it seems that’s far in the future.