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Tulips, Myths, and Cryptocurrencies

206 points by darwhy 9y ago

deleted 9y ago
[deleted]
tobltobs 9y ago
> ... and it is increasingly trivial to convert [Bitcoin] to the currency of your choice. I think the author lives in a bubble. For 99% of all humans this is not true.
- marcell 9y ago
  For 5% of humans living in USA, or 10% of humans living in Europe, it's pretty easy if you have a bank account: coinbase.com. I don't know the situation in China as well, but it's doable as some of the price action is driven by Chinese buyers. So definitely not as much of a bubble as your comment may suggest.
- mlindner 9y ago
  At this point it's not too much harder than opening a bank account.
  - tobltobs 9y ago
    Outside of the first world bubble opening a bank account isn't trivial.
    - prawn 9y ago
      Even in the first world, I wouldn't call it trivial.
- Tepix 9y ago
  99% of humans don't have a bank account?
xiaoma 9y ago
The comparison with the internet of 20 years ago is a good one. Much like the internet did then, crytpo-currencies now draw an assortment of technologists, anarchists, bankers and futurists. There's also a wildly optimistic bull case to be made and it's very difficult to determine a reasonable valuation. In contrast, tulips weren't a new technology, they had no power to change the world's business or social graph and a radically new tools couldn't be build on top of them.
- dade_ 9y ago
  Tulip bulbs aren't liquid, don't fit in my wallet and only last 12 months.
  - pishpash 9y ago
    But they have inherent utility unlike Bitcoins.
    - RealityVoid 9y ago
      Really? What is their inherent utility? Looking pretty? I'm pretty sure a stronger case can be made for bitcoin's utility than than.
      - armed10 9y ago
        They're edible and a common source of food in the Netherlands during world war 2.
        JoachimSchipper 9y ago
        ... the Dutch (in northern cities) turned to eating tulips - and everything else - in the desperate "hunger winter" of 1944; that's very different from "a common source of food (...) during world war 2". (Tulips are obviously not an efficient food source; don't expect to see people eating tulips except in unplanned-for emergencies.)
      - 9y ago
TimJYoung 9y ago
I know very little about blockchain technology other than the high points, but this statement really intrigued me: "The defining characteristic of anything digital is its zero marginal cost…Bitcoin and the breakthrough it represents, broadly speaking, changes all that. For the first time something can be both digital and unique, without any real world representation." My question is this: is this the solution to our ongoing problem of not being able to properly reward the creation of digital goods because they can be infinitely reproduced ? I know that this could be considered bad news by a lot of people that use such digital goods for free, but this type of technology can't help but be a net positive benefit for everyone, if true. Especially since we're seeing a future in which more and more people will experience the ill effects of automation on their jobs and careers.
- pishpash 9y ago
  No. That statement is silly. Unique and digital was always possible.
  - RealityVoid 9y ago
    How was it alwys possible? I'm honestly curious, this seems like it doesn't have an obvious solution. This time it's provably unique ownership.
    - pishpash 9y ago
      Unique ownership is proved by signing with a unique digital signature, long possible. You must be thinking of something else entirely.
      - benchaney 9y ago
        Signatures don't prove ownership. The prove agreement. Ownership is an entirely different concept.
      - RealityVoid 9y ago
        Unless I'm missing something by signing a digital signature, you're not proving ownership, you're proving identity, a somewhat different concept. If I think a little deeper, it is true, you're proving identity by proving ownership of a private key, but the goal of crypto is proving ownership based on previous peer-agreed ownership by proving identity by proving ownership of a private key. Or maybe I'm just full of shit, but It intuitively feels different than just signing something.
davidgerard 9y ago
> This is the total market capitalization of all cryptocurrencies This is where he lost me. "Market cap" is a meaningless number for cryptos, as it's not realisable at all. It also gets people thinking of cryptos like companies, where you could actually realise something like it. His entire thesis is "you can't prove this isn't just a bubble of timing!" and it's not a strong argument. Every bubble ever has had people claiming this one is unique.
- pishpash 9y ago
  How is that different from any other market cap measurement?
  - _coldfire 9y ago
    Most companies don't issues millions of new shares everyday
    - unabridged 9y ago
      Most companies don't have strict, unchanging rules about issuing new shares
    - RexetBlell 9y ago
      Not all cryptocurrencies issue new tokens every day. For example, Ripple had a fixed amount from the start and no new ones will ever be issued.
  - davidgerard 9y ago
    If a company is worth $100m, you could buy it for something in the region of $100m - though that may go up of course if people get wind of it, it would generally still be in the same region. Crypto "market cap" doesn't work like that - cryptos, including Bitcoin, are so thinly traded that the price is exquisitely sensitive to trades many magnitudes smaller than the total number of units. There's 15 million bitcoins, but trades on the order of 100 BTC can cause flash crashes. e.g. http://www.coindesk.com/high-seas-bitcoin-trading-whales-still-make-waves/ http://www.coindesk.com/high-seas-bitcoin-trading-whales-sti... Apple has 5 billion shares outstanding, but you couldn't flash-crash it selling 20,000 of them - the volume is ~20m/day.
Ologn 9y ago
Bitcoins are different than tulips or homes with subprime mortgages or dot com companies in 1999 in that they are completely useless. They have no value whatsoever. Usually bubbles are built on something real. Even Ponzi's international reply coupons had some underlying value. Bitcoins are completely worthless. There's a lot of ferment for them, but then there were Casey Serin's making big money in 2007 on subprime loans, or Pets.com superbowl commercials, or Dutch tulip bulbs. It always feels heady during the times people are publishing books with titles like "Dow 36000". It's almost always right before the crash. As Bitcoins are worthless, people go casting about for something else which they consider worthless. They come up with the dollar bill, and say the Bitcoin is just like the dollar bill, but electronic and untied to government. This is pretty silly for a whole host of reasons. It would take too long to go into fully, and pointless to those who've already drunk the kool-aid. The USA has the world's largest GNI by some measures, it holds thousands of tons gold in Fort Knox and other places. In 1971 the dollar was an abstraction of its gold reserves, since then its been an abstraction of that abstraction, something akin to class B non-voting shares of a large stock. If it were possible for states to run the printing presses and create value, you'd wonder why that innovation was discovered in the past century. Any how, the Bitcoin scam claimed a magic wand could create value, so unsurprisingly other scams arose - Ethereum, Ripple, NEM etc. all currently have billion dollar market caps. It's illustrative of how these cons work. I mean I don't know how much more blatantly it can be spelled out to you its a scam - Bitcoin was not created by a Ponzi, but by some criminal who has kept their identity completely secret. If this doesn't wake you up to the con, I don't know what will. Except its inevitable crash to becoming worthless, just like "Flooz" and "Beanz" did 17 years ago. And those were electronic currencies created by VC backed firms.
- paulpauper 9y ago
  Bitcoin provides security, a large and liquid market, price transparency, and utility. Those alone have value .Flooz and Beenz had none of those. Foreign millionaires are buying bitcoin because it's safer , in many respects, than storing millions of dollars in a bank. Buying bitcoin is another form of diversification. It's not going away, sorry.
  - 9y ago
boznz 9y ago
The current Crypto-currencies (why not just say bitcoin!) benefit early adopters, people in unstable economies, speculators and criminals. I suspect the biggest by far at the moment is Speculators. I dont see any reason for the average Joe to buy them and like anything with speculation involved dont put all your savings into it unless your happy to get burnt.
dmichulke 9y ago
So what market cap should be the top? We had 80 bn yesterday ...
- resoluti0n 9y ago
  I think we're still at a the very early stage of the crypto-currencies. Something like at the point when just a few geeks were surfing the Internet in 1994 with a 486 PC running Windows 3.11 and a 14.4 bps modem. So there's still a lot of room for the market cap to grow IMHO.
  - h1d 9y ago
    Win 3.1 was already after average families figured its usefulness with usable GUI for moms. Blockchain is earlier than that. It's still trying to figure out how useful it can be.
jondubois 9y ago
I think that Bitcoin and other alt-coins do have some intrinsic value as a means of facilitating trade between people but I think that they (Bitcoins in particular) are currently overvalued. If you think about tulips today, they are not expensive anymore but they do cost something and they still have some utility value as an ornament. The value of anything (regardless of whether it is rare or not) tends to be proportional to the cost of producing the thing. It doesn't cost much to produce a new cryptocurrency and because cryptocurrencies can be easily traded/converted between each other, they are essentially all the same. The tulips might come in many varieties, but they are all just tulips and their financial value is derived from a common utility attribute (which is ornamentation). Because of this, one should not value Bitcoin because of its perceived scarcity - Ultimately, it all comes down to utility value. Scarcity is not a utility.
- tomw1808 9y ago
  It also doesn't cost much to "produce" a stock (like in printing it on a paper). It's the underlaying asset that is valuable, not "the stock". Same with all the new currencies/tokens: They are bound to the underlaying value of the company that will do something with it...
mcguire 9y ago
"And, in the grand scheme of things, it is mostly true today that cryptocurrencies don’t have meaningful “industrial [or] consumer use except as a medium of exchange.” What he is the most right about, though, is that cryptocurrencies have no intrinsic value." One point: bitcoin is inherently deflationary. Anyone who uses it as a medium of exchange, specifically, who buys something, is economically irrational.
- Nelkins 9y ago
  What if a person uses it to buy something that will help them get more Bitcoin (i.e. investing in a business)? Doesn't seem economically irrational to me, so long as the return is greater than the increase in value that would be gained from just sitting on it.
- davidivadavid 9y ago
  That "point" has been debunked in every bitcoin thread I've ever read. Because a currency is deflationary doesn't mean that it's irrational to trade it. You can't eat bitcoins.
  - mcguire 9y ago
    That is true. However, the nature of bitcoin is that you will be able to buy more food with it next year than you can today. If you have any other assets, you would be better off trading those than your bitcoin hoard.
will_brown 9y ago
>In fact, it turns out gold — at least the idea that it is of intrinsically more worth than another mineral — is another myth. i always found this to be a ridiculous statement. you won't do well coining non metalic minerals/elements, and many others are subject to corrosion. gold on earth is finite and it is not man made. gold is the third most metalic electrical conductor. gold is also has the oligodynamic effect of inhibiting bacterial growth. >One of the big recent risers, Ethereum, is exactly that: Ethereum is based on a blockchain, like Bitcoin, which means it has an attached currency (Ether) that incentivizes miners to verify transactions. However, the protocol includes smart contract functionality, which means that two untrusted parties can engage in a contract without a 3rd-party enforcement entity. all this effort to not pay lawyers to draft/read/interperet contracts due to "legalese" only to write contracts in programing languages no one can read and understand....see the doa contract which was misread by the founders, by the third party reviewer, and every single person who bought in (except the party that stole $150m via smart contract).
- jpatokal 9y ago
  Most of gold's value is indeed a "myth". Silver is the best metallic conductor, it's equally finite and not man made, yet it trades at around 1/50th of gold value, despite having considerable decorative value itself. That 50x difference is not all because gold inhibits bacterial growth (so do some plastics) or does not corrode as easily. The author's main point, though, is that perception is reality. If I accidentally offend you, your offense does not become any less real just because I didn't mean to offend you, or that you should not have been offended.
  - thatcat 9y ago
    >That 50x difference is not all because gold inhibits bacterial growth. Silver also inhibits bacterial growth, which is why it's used in deodorants, silverware, etc.
    - deleted 9y ago
      [deleted]
- 9y ago
darkFunction 9y ago
It's worth noting that many new blockchain implementations are not intending to merely facilitate the transfer of monetary value but aim to decentralise resources, which is a less "fictional" goal. Look at Sia / StorJ / Maidsafe, for secure decentralised storage (Storage on Sia is currently something like 20x cheaper than Amazon S3 and offers the potential for storage providers to compete on price per TB alone, without having to provide a front-end or marketing). Then there are distributed computing applications such as Golem and iExec. All of these are in the early development (even concept) stages but investors are seeing the obvious huge upsides if the teams can pull it off, and to me these are the most exciting technologies which counter the aged arguments about crypto's worth as an exchange of value with solid real-world use cases which can be compared in real terms to current centralised solutions.
- FrozenVoid 9y ago
  >decentralize Bitcoin has central banks you just call them exchanges and wallet providers. Most cryptocurrencies depend on specific websites and central developer teams(who may decided to fork the currency blockchain at their whim).
  - darkFunction 9y ago
    Many but not all. Sia for instance will continue to exist independent of the company, it is fully decentralised. I believe your statement is true of StorJ as they rely on centralised services but I can't comment on the others. Bitcoin would continue to exist without the exchanges and wallets, they are peripheral to the core technology. Blockchains can't be 'forked at a whim' without majority consensus, that's the whole point. ETH is the obvious example where the devs forked with support from the community and it led to the ETH/ETC divide.
    - FrozenVoid 9y ago
      What you would do if developers turn corrupt and force a new version with unwelcome changes? Most people see developers as some kind of robots, but cryprocurrencies are often fraud schemes where developers control the market.
justAsking2017 9y ago
Wow, people still stuck on this tulip bulb thing ... How about a little analogy? In the mid fifties a trucker conceived the idea of having his trucks' cargo loaded directly onto a ship, thus inventing the container ship, which essentially revolutionized the shipping industry. Nobody moves cargo the old way anymore, unless they are completely insane. Moving value using distributed consensus systems based on pure mathematics is a similar revolution. However, it is likely to be at least an order of magnitude more significant. It might be a good time to invest.
- foepys 9y ago
  Loading the cargo onto ships was only the next logical step because it has almost not disadvantages. Blockchains, especially Bitcoin, have multiple fundamental flaws that only wait until they are exploited. Bitcoin for example is the most inefficient way of handling payments ever invented. The whole system is based on the fact that not someone with a higher hashrate comes along. State-level actors might be not be a threat to the system right now but wait until it gets more and more popular. Most of the miners (and the hashrate) are in China and the Chinese government will not sit with their hands in their laps while a unregulated currency becomes widely adopted in the country.
- lmm 9y ago
  Value already resides almost entirely in distributed consensus systems such as Visa, the international banking system, etc. That revolution has already happened. A zero-trust distributed database is kind of cool. A distributed database that can do 6 transactions/second with a commit time of about 30 minutes and an enormous energy consumption is not very cool. The only people for whom bitcoin is valuable are people for whom the former outweighs the latter, i.e. people for whom trust is extremely costly and zero-trust extremely valuable. Basically, criminals. There's a decent population of those, but it's still a small fraction of society and shrinking every day; drug legalization and the collapse of capital controls in the few places that still have them will destroy most of bitcoin's value.
  - Jabanga 9y ago
    >The only people for whom bitcoin is valuable are people for whom the former outweighs the latter, i.e. people for whom trust is extremely costly and zero-trust extremely valuable. Basically, criminals. There's a decent population of those, but it's still a small fraction of society and shrinking every day; drug legalization and the collapse of capital controls in the few places that still have them will destroy most of bitcoin's value. In the developed world, capital controls are definitely increasing. Financial regulations in general are increasing. Mass-surveillance of people's personal finances, and in particular, private transactions, is increasing as well, as cash gets replaced by identity-linked electronic accounts controlled by larger trusted third parties. There is demand for a cash-like electronic currency. In the developing world, there are billions who are unbanked, and with one-third of children being born without a birth certificate [1], and the trend toward increasing centralisation and regulation of banking making government identity documents increasingly necessary to get a bank account, there will likely continue to be a large number of unbanked in the world for whom a permissionless and censorship resistant electronic currency is extremely valuable. [1] http://www.independent.co.uk/news/world/politics/220-million-children-who-dont-exist-a-birth-certificate-is-a-passport-to-a-better-life-so-why-cant-8735046.html http://www.independent.co.uk/news/world/politics/220-million...
S410520 9y ago
Much butthurt, such wow :D Anyone failing to see this magnificent invention for what it is will just hurt him or herself. If you are going to give anyone else power over your money you are going to have a bad time, simple as that. History pretty much proves this beyond any doubt.
- rspeer 9y ago
  HN isn't Reddit, dude.
mrb 9y ago
Author is right about the gold comparison. Only 10% of the gold produced worldwide is actually used only for its intrinsic value (physical properties in industrial uses). 90% is used "just because it has value" (ie. stored in a vault or used as jewelry[1]). So its intrinsic value is completely insufficient to justify and support its market price which is in fact driven by speculation, not by industrial demand. [1] Many other shiny, corrosion-resistant, and cheaper materials exist and would make more sense to use for jewelry. But when gold is used over these other materials, it is almost always for the only reason that it is more valuable.
- dsacco 9y ago
  That's slightly incorrect. Gold has intrinsic value beyond industrial uses. Intrinsic value doesn't require utility (but it often includes it), it only requires a use beyond a consensus exchange rate and speculation. Many people enjoy using gold in jewelry for its own sake, not because they want to speculate on it. That enjoyment functions as organic demand, which increases the price. As long as a thing has consumer demand that doesn't derive from speculation or decay quickly with time, it can have intrinsic value. Phrased another way, "jewelry" and "dentistry" are both legitimate uses of gold, because they both create organic consumer demand (and from what I can tell most people don't use gold in jewelry for speculative reasons). The author's usage of the word "intrinsic" is confusing to me, because its fuzzy and imprecise. He's not really using the term in the traditional financial sense, as you would in e.g. fundamental valuation, or options pricing (theta decay, etc).
  - mrb 9y ago
    "Many people enjoy using gold in jewelry for its own sake, not because they want to speculate on it" I disagree. But it's not because they want to speculate. People enjoy solid gold jewelry over gold plated jewelry for the only reason that the first is "more valuable" and is associated to a "higher status." They also prefer real gold over gold imitations for the same reason. Here is a thought experiment: if gold prices fell to $0.001 per gram tomorrow, would people continue using it in jewelry? No. I guarantee you demand for gold would dramatically fall in jewelry. About 50% of the gold produced ends up in jewelry. Most of it ends up in solid gold / gold filled jewelry items (the rest in gold plated items.) And my claim is that demand for these solid gold / gold filled jewelry items would fall.
deleted 9y ago
[deleted]
NoGravitas 9y ago
The basic argument of this article seems to be that the real benefit of cryptocurrencies, other than their speculative value, is that they provide a way of enforcing artificial scarcity in the digital realm, where scarcity does not come naturally. As someone dedicated to eliminating scarcity in the material world, (a la Bookchin's /Post-Scarcity Anarchism/, compare Doctorow's /Walkaway/), this argument does not sit well with me.
- just_one_time_ 9y ago
  Think about how the idea of the US dollar would "sit with you" if you had somehow grown up in a free society.
hedgew 9y ago
What will happen once Bitcoin is replaced by a clearly superior technology? It is quite likely that cryptocurrencies and related tech will revolutionize many aspects of our lives. But that is also exactly why Bitcoin will decline. Its current value comes from speculation rather than utility. When actual business is done on the blockchain, the value created by that will surpass value from speculation so much that no consideration will be given to bitcoin and its technological baggage. Business will simply use a newer crypto because it is more economical. We'll use something that's faster, easier, cheaper, and less energy consuming. When superior competitors exist, Bitcoin will simply have no inherent value. It will be like a government invalidating a currency, except it won't happen as fast.
- CyberDildonics 9y ago
  > What will happen once Bitcoin is replaced by a clearly superior technology? Maybe the same thing that happened when JPEG, mp3, email, C, and http were replaced with superior technologies. I actually think the future will be a combination of crypto-currencies for quite a while, but there are plenty of examples of certain formats and protocols being good enough to keep their dominance after having a superior network effect. Bitcoin's major hurdle right now is that Blockstream, the current bitcoin github maintainers, and the moderators of /r/bitcoin working very hard to suffocate bitcoin through lies and propaganda. There are hundreds of cases of them lying and misleading people, while /r/bitcoin is heavily censored. Even here on hacker news they are aggressive in controlling the narrative, but go to /r/btc and ask how many people have been banned or have their comments deleted from /r/bitcoin. Or go to /r/bitcoin and say something positive about bitcoin unlimited or bitcoin classic. /r/bitcoin's moderation logs aren't even public.
  - just_one_time_ 9y ago
    Dildo, you seem to get what so many "hackers" here are willfully ignoring. They keep trying to make comparisons to past tech or bubbles, but keep failing. As hackers we should be one of the most open to new tech but amazingly, being part of this group the last 2-3 years we have been very resistant of it.
  - 9y ago

206 points by darwhy 9y ago

deleted 9y ago

[deleted]

> ... and it is increasingly trivial to convert [Bitcoin] to the currency of your choice. I think the author lives in a bubble. For 99% of all humans this is not true.

marcell 9y ago
For 5% of humans living in USA, or 10% of humans living in Europe, it's pretty easy if you have a bank account: coinbase.com. I don't know the situation in China as well, but it's doable as some of the price action is driven by Chinese buyers. So definitely not as much of a bubble as your comment may suggest.
mlindner 9y ago
At this point it's not too much harder than opening a bank account.
- tobltobs 9y ago
  Outside of the first world bubble opening a bank account isn't trivial.
  - prawn 9y ago
    Even in the first world, I wouldn't call it trivial.
Tepix 9y ago
99% of humans don't have a bank account?

xiaoma 9y ago

The comparison with the internet of 20 years ago is a good one. Much like the internet did then, crytpo-currencies now draw an assortment of technologists, anarchists, bankers and futurists. There's also a wildly optimistic bull case to be made and it's very difficult to determine a reasonable valuation. In contrast, tulips weren't a new technology, they had no power to change the world's business or social graph and a radically new tools couldn't be build on top of them.

dade_ 9y ago
Tulip bulbs aren't liquid, don't fit in my wallet and only last 12 months.
- pishpash 9y ago
  But they have inherent utility unlike Bitcoins.
  - RealityVoid 9y ago
    Really? What is their inherent utility? Looking pretty? I'm pretty sure a stronger case can be made for bitcoin's utility than than.
    - armed10 9y ago
      They're edible and a common source of food in the Netherlands during world war 2.
      - JoachimSchipper 9y ago
        ... the Dutch (in northern cities) turned to eating tulips - and everything else - in the desperate "hunger winter" of 1944; that's very different from "a common source of food (...) during world war 2". (Tulips are obviously not an efficient food source; don't expect to see people eating tulips except in unplanned-for emergencies.)
    - 9y ago

TimJYoung 9y ago

I know very little about blockchain technology other than the high points, but this statement really intrigued me: "The defining characteristic of anything digital is its zero marginal cost…Bitcoin and the breakthrough it represents, broadly speaking, changes all that. For the first time something can be both digital and unique, without any real world representation." My question is this: is this the solution to our ongoing problem of not being able to properly reward the creation of digital goods because they can be infinitely reproduced ? I know that this could be considered bad news by a lot of people that use such digital goods for free, but this type of technology can't help but be a net positive benefit for everyone, if true. Especially since we're seeing a future in which more and more people will experience the ill effects of automation on their jobs and careers.

pishpash 9y ago
No. That statement is silly. Unique and digital was always possible.
- RealityVoid 9y ago
  How was it alwys possible? I'm honestly curious, this seems like it doesn't have an obvious solution. This time it's provably unique ownership.
  - pishpash 9y ago
    Unique ownership is proved by signing with a unique digital signature, long possible. You must be thinking of something else entirely.
    - benchaney 9y ago
      Signatures don't prove ownership. The prove agreement. Ownership is an entirely different concept.
    - RealityVoid 9y ago
      Unless I'm missing something by signing a digital signature, you're not proving ownership, you're proving identity, a somewhat different concept. If I think a little deeper, it is true, you're proving identity by proving ownership of a private key, but the goal of crypto is proving ownership based on previous peer-agreed ownership by proving identity by proving ownership of a private key. Or maybe I'm just full of shit, but It intuitively feels different than just signing something.

davidgerard 9y ago

> This is the total market capitalization of all cryptocurrencies This is where he lost me. "Market cap" is a meaningless number for cryptos, as it's not realisable at all. It also gets people thinking of cryptos like companies, where you could actually realise something like it. His entire thesis is "you can't prove this isn't just a bubble of timing!" and it's not a strong argument. Every bubble ever has had people claiming this one is unique.

pishpash 9y ago
How is that different from any other market cap measurement?
- _coldfire 9y ago
  Most companies don't issues millions of new shares everyday
  - unabridged 9y ago
    Most companies don't have strict, unchanging rules about issuing new shares
  - RexetBlell 9y ago
    Not all cryptocurrencies issue new tokens every day. For example, Ripple had a fixed amount from the start and no new ones will ever be issued.
- davidgerard 9y ago
  If a company is worth $100m, you could buy it for something in the region of $100m - though that may go up of course if people get wind of it, it would generally still be in the same region. Crypto "market cap" doesn't work like that - cryptos, including Bitcoin, are so thinly traded that the price is exquisitely sensitive to trades many magnitudes smaller than the total number of units. There's 15 million bitcoins, but trades on the order of 100 BTC can cause flash crashes. e.g. http://www.coindesk.com/high-seas-bitcoin-trading-whales-still-make-waves/ http://www.coindesk.com/high-seas-bitcoin-trading-whales-sti... Apple has 5 billion shares outstanding, but you couldn't flash-crash it selling 20,000 of them - the volume is ~20m/day.

Ologn 9y ago

Bitcoins are different than tulips or homes with subprime mortgages or dot com companies in 1999 in that they are completely useless. They have no value whatsoever. Usually bubbles are built on something real. Even Ponzi's international reply coupons had some underlying value. Bitcoins are completely worthless. There's a lot of ferment for them, but then there were Casey Serin's making big money in 2007 on subprime loans, or Pets.com superbowl commercials, or Dutch tulip bulbs. It always feels heady during the times people are publishing books with titles like "Dow 36000". It's almost always right before the crash. As Bitcoins are worthless, people go casting about for something else which they consider worthless. They come up with the dollar bill, and say the Bitcoin is just like the dollar bill, but electronic and untied to government. This is pretty silly for a whole host of reasons. It would take too long to go into fully, and pointless to those who've already drunk the kool-aid. The USA has the world's largest GNI by some measures, it holds thousands of tons gold in Fort Knox and other places. In 1971 the dollar was an abstraction of its gold reserves, since then its been an abstraction of that abstraction, something akin to class B non-voting shares of a large stock. If it were possible for states to run the printing presses and create value, you'd wonder why that innovation was discovered in the past century. Any how, the Bitcoin scam claimed a magic wand could create value, so unsurprisingly other scams arose - Ethereum, Ripple, NEM etc. all currently have billion dollar market caps. It's illustrative of how these cons work. I mean I don't know how much more blatantly it can be spelled out to you its a scam - Bitcoin was not created by a Ponzi, but by some criminal who has kept their identity completely secret. If this doesn't wake you up to the con, I don't know what will. Except its inevitable crash to becoming worthless, just like "Flooz" and "Beanz" did 17 years ago. And those were electronic currencies created by VC backed firms.

paulpauper 9y ago
Bitcoin provides security, a large and liquid market, price transparency, and utility. Those alone have value .Flooz and Beenz had none of those. Foreign millionaires are buying bitcoin because it's safer , in many respects, than storing millions of dollars in a bank. Buying bitcoin is another form of diversification. It's not going away, sorry.
- 9y ago

boznz 9y ago

The current Crypto-currencies (why not just say bitcoin!) benefit early adopters, people in unstable economies, speculators and criminals. I suspect the biggest by far at the moment is Speculators. I dont see any reason for the average Joe to buy them and like anything with speculation involved dont put all your savings into it unless your happy to get burnt.

dmichulke 9y ago

So what market cap should be the top? We had 80 bn yesterday ...

resoluti0n 9y ago
I think we're still at a the very early stage of the crypto-currencies. Something like at the point when just a few geeks were surfing the Internet in 1994 with a 486 PC running Windows 3.11 and a 14.4 bps modem. So there's still a lot of room for the market cap to grow IMHO.
- h1d 9y ago
  Win 3.1 was already after average families figured its usefulness with usable GUI for moms. Blockchain is earlier than that. It's still trying to figure out how useful it can be.

jondubois 9y ago

I think that Bitcoin and other alt-coins do have some intrinsic value as a means of facilitating trade between people but I think that they (Bitcoins in particular) are currently overvalued. If you think about tulips today, they are not expensive anymore but they do cost something and they still have some utility value as an ornament. The value of anything (regardless of whether it is rare or not) tends to be proportional to the cost of producing the thing. It doesn't cost much to produce a new cryptocurrency and because cryptocurrencies can be easily traded/converted between each other, they are essentially all the same. The tulips might come in many varieties, but they are all just tulips and their financial value is derived from a common utility attribute (which is ornamentation). Because of this, one should not value Bitcoin because of its perceived scarcity - Ultimately, it all comes down to utility value. Scarcity is not a utility.

tomw1808 9y ago
It also doesn't cost much to "produce" a stock (like in printing it on a paper). It's the underlaying asset that is valuable, not "the stock". Same with all the new currencies/tokens: They are bound to the underlaying value of the company that will do something with it...

mcguire 9y ago

"And, in the grand scheme of things, it is mostly true today that cryptocurrencies don’t have meaningful “industrial [or] consumer use except as a medium of exchange.” What he is the most right about, though, is that cryptocurrencies have no intrinsic value." One point: bitcoin is inherently deflationary. Anyone who uses it as a medium of exchange, specifically, who buys something, is economically irrational.

Nelkins 9y ago
What if a person uses it to buy something that will help them get more Bitcoin (i.e. investing in a business)? Doesn't seem economically irrational to me, so long as the return is greater than the increase in value that would be gained from just sitting on it.
davidivadavid 9y ago
That "point" has been debunked in every bitcoin thread I've ever read. Because a currency is deflationary doesn't mean that it's irrational to trade it. You can't eat bitcoins.
- mcguire 9y ago
  That is true. However, the nature of bitcoin is that you will be able to buy more food with it next year than you can today. If you have any other assets, you would be better off trading those than your bitcoin hoard.

will_brown 9y ago

>In fact, it turns out gold — at least the idea that it is of intrinsically more worth than another mineral — is another myth. i always found this to be a ridiculous statement. you won't do well coining non metalic minerals/elements, and many others are subject to corrosion. gold on earth is finite and it is not man made. gold is the third most metalic electrical conductor. gold is also has the oligodynamic effect of inhibiting bacterial growth. >One of the big recent risers, Ethereum, is exactly that: Ethereum is based on a blockchain, like Bitcoin, which means it has an attached currency (Ether) that incentivizes miners to verify transactions. However, the protocol includes smart contract functionality, which means that two untrusted parties can engage in a contract without a 3rd-party enforcement entity. all this effort to not pay lawyers to draft/read/interperet contracts due to "legalese" only to write contracts in programing languages no one can read and understand....see the doa contract which was misread by the founders, by the third party reviewer, and every single person who bought in (except the party that stole $150m via smart contract).

jpatokal 9y ago
Most of gold's value is indeed a "myth". Silver is the best metallic conductor, it's equally finite and not man made, yet it trades at around 1/50th of gold value, despite having considerable decorative value itself. That 50x difference is not all because gold inhibits bacterial growth (so do some plastics) or does not corrode as easily. The author's main point, though, is that perception is reality. If I accidentally offend you, your offense does not become any less real just because I didn't mean to offend you, or that you should not have been offended.
- thatcat 9y ago
  >That 50x difference is not all because gold inhibits bacterial growth. Silver also inhibits bacterial growth, which is why it's used in deodorants, silverware, etc.
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darkFunction 9y ago

It's worth noting that many new blockchain implementations are not intending to merely facilitate the transfer of monetary value but aim to decentralise resources, which is a less "fictional" goal. Look at Sia / StorJ / Maidsafe, for secure decentralised storage (Storage on Sia is currently something like 20x cheaper than Amazon S3 and offers the potential for storage providers to compete on price per TB alone, without having to provide a front-end or marketing). Then there are distributed computing applications such as Golem and iExec. All of these are in the early development (even concept) stages but investors are seeing the obvious huge upsides if the teams can pull it off, and to me these are the most exciting technologies which counter the aged arguments about crypto's worth as an exchange of value with solid real-world use cases which can be compared in real terms to current centralised solutions.

FrozenVoid 9y ago
>decentralize Bitcoin has central banks you just call them exchanges and wallet providers. Most cryptocurrencies depend on specific websites and central developer teams(who may decided to fork the currency blockchain at their whim).
- darkFunction 9y ago
  Many but not all. Sia for instance will continue to exist independent of the company, it is fully decentralised. I believe your statement is true of StorJ as they rely on centralised services but I can't comment on the others. Bitcoin would continue to exist without the exchanges and wallets, they are peripheral to the core technology. Blockchains can't be 'forked at a whim' without majority consensus, that's the whole point. ETH is the obvious example where the devs forked with support from the community and it led to the ETH/ETC divide.
  - FrozenVoid 9y ago
    What you would do if developers turn corrupt and force a new version with unwelcome changes? Most people see developers as some kind of robots, but cryprocurrencies are often fraud schemes where developers control the market.

justAsking2017 9y ago

Wow, people still stuck on this tulip bulb thing ... How about a little analogy? In the mid fifties a trucker conceived the idea of having his trucks' cargo loaded directly onto a ship, thus inventing the container ship, which essentially revolutionized the shipping industry. Nobody moves cargo the old way anymore, unless they are completely insane. Moving value using distributed consensus systems based on pure mathematics is a similar revolution. However, it is likely to be at least an order of magnitude more significant. It might be a good time to invest.

foepys 9y ago
Loading the cargo onto ships was only the next logical step because it has almost not disadvantages. Blockchains, especially Bitcoin, have multiple fundamental flaws that only wait until they are exploited. Bitcoin for example is the most inefficient way of handling payments ever invented. The whole system is based on the fact that not someone with a higher hashrate comes along. State-level actors might be not be a threat to the system right now but wait until it gets more and more popular. Most of the miners (and the hashrate) are in China and the Chinese government will not sit with their hands in their laps while a unregulated currency becomes widely adopted in the country.
lmm 9y ago
Value already resides almost entirely in distributed consensus systems such as Visa, the international banking system, etc. That revolution has already happened. A zero-trust distributed database is kind of cool. A distributed database that can do 6 transactions/second with a commit time of about 30 minutes and an enormous energy consumption is not very cool. The only people for whom bitcoin is valuable are people for whom the former outweighs the latter, i.e. people for whom trust is extremely costly and zero-trust extremely valuable. Basically, criminals. There's a decent population of those, but it's still a small fraction of society and shrinking every day; drug legalization and the collapse of capital controls in the few places that still have them will destroy most of bitcoin's value.
- Jabanga 9y ago
  >The only people for whom bitcoin is valuable are people for whom the former outweighs the latter, i.e. people for whom trust is extremely costly and zero-trust extremely valuable. Basically, criminals. There's a decent population of those, but it's still a small fraction of society and shrinking every day; drug legalization and the collapse of capital controls in the few places that still have them will destroy most of bitcoin's value. In the developed world, capital controls are definitely increasing. Financial regulations in general are increasing. Mass-surveillance of people's personal finances, and in particular, private transactions, is increasing as well, as cash gets replaced by identity-linked electronic accounts controlled by larger trusted third parties. There is demand for a cash-like electronic currency. In the developing world, there are billions who are unbanked, and with one-third of children being born without a birth certificate [1], and the trend toward increasing centralisation and regulation of banking making government identity documents increasingly necessary to get a bank account, there will likely continue to be a large number of unbanked in the world for whom a permissionless and censorship resistant electronic currency is extremely valuable. [1] http://www.independent.co.uk/news/world/politics/220-million-children-who-dont-exist-a-birth-certificate-is-a-passport-to-a-better-life-so-why-cant-8735046.html http://www.independent.co.uk/news/world/politics/220-million...

S410520 9y ago

Much butthurt, such wow :D Anyone failing to see this magnificent invention for what it is will just hurt him or herself. If you are going to give anyone else power over your money you are going to have a bad time, simple as that. History pretty much proves this beyond any doubt.

rspeer 9y ago
HN isn't Reddit, dude.

mrb 9y ago

Author is right about the gold comparison. Only 10% of the gold produced worldwide is actually used only for its intrinsic value (physical properties in industrial uses). 90% is used "just because it has value" (ie. stored in a vault or used as jewelry[1]). So its intrinsic value is completely insufficient to justify and support its market price which is in fact driven by speculation, not by industrial demand. [1] Many other shiny, corrosion-resistant, and cheaper materials exist and would make more sense to use for jewelry. But when gold is used over these other materials, it is almost always for the only reason that it is more valuable.

dsacco 9y ago
That's slightly incorrect. Gold has intrinsic value beyond industrial uses. Intrinsic value doesn't require utility (but it often includes it), it only requires a use beyond a consensus exchange rate and speculation. Many people enjoy using gold in jewelry for its own sake, not because they want to speculate on it. That enjoyment functions as organic demand, which increases the price. As long as a thing has consumer demand that doesn't derive from speculation or decay quickly with time, it can have intrinsic value. Phrased another way, "jewelry" and "dentistry" are both legitimate uses of gold, because they both create organic consumer demand (and from what I can tell most people don't use gold in jewelry for speculative reasons). The author's usage of the word "intrinsic" is confusing to me, because its fuzzy and imprecise. He's not really using the term in the traditional financial sense, as you would in e.g. fundamental valuation, or options pricing (theta decay, etc).
- mrb 9y ago
  "Many people enjoy using gold in jewelry for its own sake, not because they want to speculate on it" I disagree. But it's not because they want to speculate. People enjoy solid gold jewelry over gold plated jewelry for the only reason that the first is "more valuable" and is associated to a "higher status." They also prefer real gold over gold imitations for the same reason. Here is a thought experiment: if gold prices fell to $0.001 per gram tomorrow, would people continue using it in jewelry? No. I guarantee you demand for gold would dramatically fall in jewelry. About 50% of the gold produced ends up in jewelry. Most of it ends up in solid gold / gold filled jewelry items (the rest in gold plated items.) And my claim is that demand for these solid gold / gold filled jewelry items would fall.

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NoGravitas 9y ago

The basic argument of this article seems to be that the real benefit of cryptocurrencies, other than their speculative value, is that they provide a way of enforcing artificial scarcity in the digital realm, where scarcity does not come naturally. As someone dedicated to eliminating scarcity in the material world, (a la Bookchin's /Post-Scarcity Anarchism/, compare Doctorow's /Walkaway/), this argument does not sit well with me.

just_one_time_ 9y ago
Think about how the idea of the US dollar would "sit with you" if you had somehow grown up in a free society.

hedgew 9y ago

What will happen once Bitcoin is replaced by a clearly superior technology? It is quite likely that cryptocurrencies and related tech will revolutionize many aspects of our lives. But that is also exactly why Bitcoin will decline. Its current value comes from speculation rather than utility. When actual business is done on the blockchain, the value created by that will surpass value from speculation so much that no consideration will be given to bitcoin and its technological baggage. Business will simply use a newer crypto because it is more economical. We'll use something that's faster, easier, cheaper, and less energy consuming. When superior competitors exist, Bitcoin will simply have no inherent value. It will be like a government invalidating a currency, except it won't happen as fast.

CyberDildonics 9y ago
> What will happen once Bitcoin is replaced by a clearly superior technology? Maybe the same thing that happened when JPEG, mp3, email, C, and http were replaced with superior technologies. I actually think the future will be a combination of crypto-currencies for quite a while, but there are plenty of examples of certain formats and protocols being good enough to keep their dominance after having a superior network effect. Bitcoin's major hurdle right now is that Blockstream, the current bitcoin github maintainers, and the moderators of /r/bitcoin working very hard to suffocate bitcoin through lies and propaganda. There are hundreds of cases of them lying and misleading people, while /r/bitcoin is heavily censored. Even here on hacker news they are aggressive in controlling the narrative, but go to /r/btc and ask how many people have been banned or have their comments deleted from /r/bitcoin. Or go to /r/bitcoin and say something positive about bitcoin unlimited or bitcoin classic. /r/bitcoin's moderation logs aren't even public.
- just_one_time_ 9y ago
  Dildo, you seem to get what so many "hackers" here are willfully ignoring. They keep trying to make comparisons to past tech or bubbles, but keep failing. As hackers we should be one of the most open to new tech but amazingly, being part of this group the last 2-3 years we have been very resistant of it.
- 9y ago