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I'm slightly confused. Can you compare a currency market cap in USD to a company valuation?? Who is "buying" a cryptocurrency....?

andruby 9y ago
You could compare it with _funding_ valuations, which is different from _buying_ a company at a certain valuation. Eg: If a company has 200M shares, and someone pays $1/share during an investment round, the company (and the press) will mention that the funding was done at a $200M valuation. The same logic is done to calculate crypto currency market cap. If there are 200M coins, and someone somewhere pays $1/coin, the market cap is reported at $200M. This is, however, the total value of all coins of that currency. Often, the person(s) or company that created a coin won't own most coins (unlike with company shares).
- LMYahooTFY 9y ago
  I see the similarities there. However, isn't there a fundamental difference in stock valuation and a currency? The currency can't "go out of business", as it's entire existence is a speculation. Anyone using a given currency speculates that it will be accepted tomorrow.
  - andruby 9y ago
    Good point. That is indeed a fundamental difference. It probably also points to a large difference between a new blockchain _Currency_ and a token _Asset_. The latter often being a proxy for company shares in an ICO.
    - LMYahooTFY 9y ago
      Was this the idea underlying the DAO? I haven't read much into it, but my impression was that it was essentially mandating signatories to a contract in order to make desired changes. Using this crypto-tech would make it impossible to circumvent and screw another party.
hedgew 9y ago
I am confused too. You can compare the market caps in a sense. A company with 1000 shares worth $10 each has the same market cap as a cryptocurrency with 1000 tokens worth $10 each. The $10 price is the highest price people are willing to buy the share/token at. In economic terms, they're quite equivalent? That's where the similarities end. A token does not mean ownership. It doesn't mean a share of profits. Tokens do not necessarily have any rules about how many there will be. More practically, a single person owning 100% of a cryptocurrency would likely reduce the value to zero. Owning 100% of a company, you can at least sell its assets.

andruby 9y ago

You could compare it with _funding_ valuations, which is different from _buying_ a company at a certain valuation. Eg: If a company has 200M shares, and someone pays $1/share during an investment round, the company (and the press) will mention that the funding was done at a $200M valuation. The same logic is done to calculate crypto currency market cap. If there are 200M coins, and someone somewhere pays $1/coin, the market cap is reported at $200M. This is, however, the total value of all coins of that currency. Often, the person(s) or company that created a coin won't own most coins (unlike with company shares).

LMYahooTFY 9y ago
I see the similarities there. However, isn't there a fundamental difference in stock valuation and a currency? The currency can't "go out of business", as it's entire existence is a speculation. Anyone using a given currency speculates that it will be accepted tomorrow.
- andruby 9y ago
  Good point. That is indeed a fundamental difference. It probably also points to a large difference between a new blockchain _Currency_ and a token _Asset_. The latter often being a proxy for company shares in an ICO.
  - LMYahooTFY 9y ago
    Was this the idea underlying the DAO? I haven't read much into it, but my impression was that it was essentially mandating signatories to a contract in order to make desired changes. Using this crypto-tech would make it impossible to circumvent and screw another party.

hedgew 9y ago

I am confused too. You can compare the market caps in a sense. A company with 1000 shares worth $10 each has the same market cap as a cryptocurrency with 1000 tokens worth $10 each. The $10 price is the highest price people are willing to buy the share/token at. In economic terms, they're quite equivalent? That's where the similarities end. A token does not mean ownership. It doesn't mean a share of profits. Tokens do not necessarily have any rules about how many there will be. More practically, a single person owning 100% of a cryptocurrency would likely reduce the value to zero. Owning 100% of a company, you can at least sell its assets.