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Why I’m Cryptophobic

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Re: Why I’m Cryptophobic

#111

Post by chaosbolt »

mjburgess wrote: post #4

There needs to be some basic economics here.. Money has value because of the value of the economic transactions in which its conducted. Government-backed currencies are forced to have value in the sense they force people to use it for their taxes. The US, additionally, forces the world to use it for oil trades. Value is in those economic transactions. A currency is just a "liquifying" of that value, to make it easier…

Well an apple has value because it's food, but if today people are willing to pay 1 banana for it and tomorrow they're willing to pay 2 bananas for it, the apple still has the same value it did yesterday because the calories in it haven't changed, but you can actually obtain twice the calories you could've obtained yesterday by taking the banana (2 bananas today), so its value today has doubled.

Bitcoin is a 0 calorie apple, today you can exchange it for 1 banana, people who hold it think tomorrow they'll be able to get 2 bananas for it.

At the end of the day we are biological entities, value is what survival and reproduction benefits we think something can provide, and if enough people are paying that price then its value is that price in dollars.

Re: Why I’m Cryptophobic

#112

Post by hans1729 »

gumby wrote: post #85
hans1729 wrote: post #66

Earlier quoted context omitted.

>Very few economic transactions are denominated in gold, either as a medium of exchange or a unit of account. That doesn't mean that gold isn't a viable medium of exchange - it obviously is, just go to a market of your choice and trade it for goods. In fact, it's the single most viable medium of exchange, globally, since currencies are tied to economies, and economies can crash. Gold can not, thus is it valuable.

> economies can crash. Gold can not… A glance at the gold prices and economies of the 19th century show that in fact the gold price certainly can crash due to gold strikes. In addition, the stock of the planet’s gold is negligible compared to the global economy (the hard to quantify set of transactions that people do with each other) so by definition can only operate at the margins. If the world crashes so far that g…

The exchange rate for gold (i.e. the interface of an economy with the material) can crash, not gold itself, thus the inherent value. That was my point, sorry if that wasn't coming across.

>If the world crashes so far that gold is a meaningful proportion, will there be much to transact at all?

This is where I start speculating, but couldn't we just create an arbitrary new currency and tie it to gold?

Re: Why I’m Cryptophobic

#113

Post by rzwitserloot »

rvense wrote: post #41
peyton wrote: post #5

Earlier quoted context omitted.

I really don’t buy the old taxes-make-the-money-work chestnut. Far too many counterexamples.

As far as I can tell, money is so entirely based on trust that it might as well consist of it, trust in in some fuzzy combination of other people's continued rationality and things staying roughly the same. I accept 100 euro bills for my labour because I believe I'll continue to be able to trade them for food and shelter.

The central tenet is the underlying intrinsic value. There are many fungible concepts that operate on a valuation that seems like it is being bought and sold solely on the basis that others think it is valuable too. However, usually there's a seed of intrinsics, something fundamental whose value will always be there.

For 'fiat currency', it's the fact that the state has a monopoly on violence and has decreed both [A] that they will accept the fiat currency for fulfillment of tax obligations, and [B] that they will not enforce a claim of debt if you have offered to pay it in fiat currency and the debtee didn't accept your offer.

For gold it's the fact that gold is considered intrinsically pretty by some, and has industrial uses.

The same can be said for iron, wood, or even air - but those are far less rare. Wood has value just as gold does - it's just that folks tend not to trade trailers full of wood as a fungible because it is unwieldy.

Stocks have intrinsic value too: It's a tiny voting share, and gives the right to enjoy a share of dividends.

Bitcoin has __nothing__. Whatsoever. It's real easy to look at the ridiculous price of stocks in companies that make it incredibly difficult to use your vote and which never pay out any dividends, or the sheer unfathomable levels of business done in terms of USD or EUR and how it seems to dwarf the intrinsic, and conclude that the intrinsic is just not important...

But is that a jump you can make?

As you said:

> I accept 100 euro bills for my labour because I believe I'll continue to be able to trade them for food and shelter.

You sure? Maybe it's 1% 'because I have absolute guarantees I can pay my taxes with this, and I have a guarantee that I can trade them for food and shelter because if I pay my bills with dollars and the recipient no longer wants them, they have no legal recourse to force me to make good in any other way'. Presumably you have certain outstanding debts that work like this (if not just simply your tax bill, which is inevitable, then your power bill, your rent or mortgage, etc), so that euro bill __already has value__ the moment you receive it. You can take your mental bookkeeping of 'oh yeah the month is halfway through so I absolutely do, unambiguously, owe my bank half a month's mortgage at the very least', and immediately reduce that amount by €100,-, given that you are holding a €100,- bill in your hands and the state has decreed that they will tell the bank to get fucked if they decide they no longer want to accept your euro for paying off that mortgage.

Re: Why I’m Cryptophobic

#114

Post by wpietri »

whatisweb3 wrote: post #70
avivo wrote: post #18

There is also a rebuttal article by the same fund: https://www.bvp.com/atlas/the-antidote-to-cryptophobia/ That said, I think Adam (the original article) is closer to being right. He doesn't even get into the thing that originally made me incredibly excited about the potential of blockchain tech—the way it lets one create a new sort of custom and irrevocable 'physics' for information and incentives. But the same irre…

I loosely agree with you but am a little more optimistic. I see centralized lenders and services like Celsius and 3AC collapsing and running off with money, or blocking withdrawals - this would not occur had the loans been made on-chain through smart contracts, and DeFi platforms like Aave are holding up just fine during this downturn. This is an example of a shift of power away from incumbents and toward the people…

To me this is fundamentally contradictory:

> the people en masse, should they choose to actually understand and use the decentralized blockchain

I used to work for financial traders. Our company was essentially the same as the companies of professional gamblers. We knew we were playing zero-sum games. Our goal was to create asymmetries in information and skill such that we got the money that other people were putting in. In the markets we played in, the opposition was mostly other well-funded players. But you can bet that there are well-funded groups with snowdrifts of math PhDs who are happy to take money from "the people en masse" that decide to trade in the markets.

Those people already exist in the non-blockchain financial economy. From predatory lenders to fake health care plans [1] to ponzi schemers, frauds, and grifters. What mainly keeps them in check is regulation, not regular people "choosing to actually understand". Because what distinguishes "the people en masse" from the people who prey on them is that the predators can devote all their time and attention to one particular hustle, while "the people en masse" have to defend against every hustle, while trying to be good at their jobs, take care of their families, and live their lives.

So the hustlers are always going to be one step ahead from regular folk. Doubly so in an unregulated, rapidly evolving space with metastasizing complexity like you see in the cryptocurrency/ico/nft/defi/web3/wft space.

[1] https://www.nytimes.com/2020/01/02/health/christian-health-c...

Re: Why I’m Cryptophobic

#115

Post by cowtools »

tromp wrote: post #36

> And similarly, crypto rewards its early followers and doesn’t promise an expanded pie, but a changing of the guard. Nearly all crypto does indeed concentrate wealth onto early adopters, by emitting the majority of supply in the first few years (or even all at launch). But fixing the block subsidy avoids such concentration, leaving most supply to later generations, much like gold. Such a purely linear emission deter…

I completely agree. Another thing I've been thinking about is this:

What if, instead of creating inflation by adding new coins, you create "inflation" by directly decreasing the value of transaction outputs, and you just keep the coinbase reward constant?

Depending on the model, you could make it so that outputs eventually go to zero, so they won't need to be recorded on the ledger forever. The old outputs just get garbage-collected.

Re: Why I’m Cryptophobic

#116

Post by yellowapple »

> The future I fear is one with a new anarcho-libertarian power structure that lacks transparency, accountability, and is the antithesis of democracy.

That's the money quote (around which most of the article revolves), and my response to it is simple:

I love watching privileged people squirm.

Anarchism (and more broadly libertarianism) is the realization of transparency, accountability, and democracy to their greatest extremes - even (hell, especially) when those extremes conflict with the capitalist status quo. The author, being "one of the top investors in Israel", has a vested interest in convincing the rest of us otherwise, such that we continue to buy into the legacy financial system that's actively failing (if not outright exploiting) people even in developed economies, let alone developing ones. He half-heartedly tries to address this in the postscript...

> I know crypto has been helpful for remittances, refugees, dissidents and even non-profits, but that has very little to do with the trillion-dollar crypto economy that has emerged.

...but he's flat wrong here, too. Cryptocurrency's usefulness for remittances, refugees, dissidents, and non-profits is exactly why that trillion dollar industry emerged in the first place, and the fact that it's leaving rich and powerful people like him shaking in their boots is the best advertising said industry could ever hope to get.

Re: Why I’m Cryptophobic

#117

Post by hackernudes »

hans1729 wrote: post #47
hackernudes wrote: post #23

Earlier quoted context omitted.

So scarcity pays no role in value? Is the Mona Lisa not valuable? If money is printed it doesn't lose value? Why would Bitcoin collapse if it was used at "any" scale? Low max transactions per second? It is used by some people (even if not many) to pay for real things as well as wages! Are you saying an "economic" transaction has to be a commodity or taxes? I think any specific currency is valuable because people beli…

>So scarcity pays no role in value? Is the Mona Lisa not valuable? You're mixing up things. I can draw a one-off picture, that doesn't make the drawing valuable (sadly. If you want to buy my paintings, hmu). The value needs to be attributed by a shared denominator, which for the example of Mona Lisa is cultural prestige. Crypto has zero inherent cultural prestige, it's only value lies in social attribution. Wallets o…

OK, maybe the Mona Lisa was not a good example. But if somehow Da Vinci had produced a billion copies of the Mona Lisa it would not be nearly as valuable! My other point in that paragraph was that if a country prints more units of currency the value goes down, so scarcity is important to value.

Re: Why I’m Cryptophobic

#118

Post by hans1729 »

apocalypstyx wrote: post #91
hans1729 wrote: post #66

Earlier quoted context omitted.

>Very few economic transactions are denominated in gold, either as a medium of exchange or a unit of account. That doesn't mean that gold isn't a viable medium of exchange - it obviously is, just go to a market of your choice and trade it for goods. In fact, it's the single most viable medium of exchange, globally, since currencies are tied to economies, and economies can crash. Gold can not, thus is it valuable.

>economies can crash. Gold can not, thus is it valuable. The thing about money is that it is a technology. But unlike other technologies, such as an electric toothbrush, for instance, it has an additional quirk: without belief, it doesn't work. Regardless of whether or not I believe in electricity, an electric tooth brush turns on and off; if the participants in an economy don't have faith in the economy, the economy…

>Gold is like an old god: its faith has a lot of coinage. However, its rule is not necessarily omnipresent.

Very nice point, you're not wrong. That being said:

>we are in a post-nuclear apocalypse. I have a small trading post and a can of beans; you have a solid gold coin. Challenge: convince me why I should take the coin.

Because it has properties that qualify it as a method of exchange (portability, provable chemical composition [...]) -- the same reasons it worked the first time. Mr Bean-Haggler, what else do you suggest we use for exchange? Mud? :-)

Re: Why I’m Cryptophobic

#119

Post by DrBazza »

mjburgess wrote: post #4

There needs to be some basic economics here.. Money has value because of the value of the economic transactions in which its conducted. Government-backed currencies are forced to have value in the sense they force people to use it for their taxes. The US, additionally, forces the world to use it for oil trades. Value is in those economic transactions. A currency is just a "liquifying" of that value, to make it easier…

> For BTC (or any coin) to have any value, it needs actual economic transactions to be conducted in it. If there aren't any, its value is smoke-and-mirrors; its not real.

Not quite - if someone, anyone, wants something that someone else has, they're prepared to buy it. That's the price. You might say tulips are valueless, but that wasn't the case when people wanted them - https://en.wikipedia.org/wiki/Tulip_mania

I'm sure everyone has said "I wouldn't pay X for Y", but someone has paid X for Y. X is the price.

As much as many on HN like to hate on crypto, people want to buy it, and people also want to sell it. That means there's a market and therefore a value to it for those people.

Re: Why I’m Cryptophobic

#120

Post by cowtools »

anonporridge wrote: post #106
cowtools wrote: post #59

Earlier quoted context omitted.

I think bitcoin is about as difficult to transact as gold, although in ideal circumstances cryptocurrency should be easier to transact than gold. However, gold has a fundamentally stronger argument for its value. Gold is useful: it has unique physical and chemical properties.

This strikes me as obviously untrue. Gold is drastically more difficult to transact in than bitcoin or any cryptocurrency. Not only is it extremely difficult to create exact change to pay in gold (shaving of milligrams per dollar?) but there is zero infrastructure or education on how to verify that the gold is real. Even modern nation state banks have been fooled by tungsten cored bars of gold. There are plenty of we…

Interesting point. I don't have anything interesting to say, but maybe you should argue with this other guy: https://news.ycombinator.com/item?id=31933417
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