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https://stratechery.com/2017/tulips-myths-and-cryptocurrencies/ https://stratechery.com/2017/tulips-myths-and-cryptocurrenci...

by v45h 9y ago

SapphireSun 9y ago
This is an interesting critique. I don't deny that other alt-coins might make use of blockchains to solve other problems that aren't currency. The thing I'm taking away from the article is that it compares BTC to gold favorably, which is an interesting angle. I generally think that gold is an irrational investment, after all there is no intrinsic value to gold other than for jewelry electronics, and high tech science experiments but that's not what the gold bugs claim. However, if you kind of turn the argument on its head a bit, gold is sort of like a ground up fiat currency. It has no intrinsic value and it has no army, but it forms a focal point of public consciousness that renders it deflationary fiat. However, there are other problems with BTC even if you accept the idea of deflationary fiat. For instance, money doesn't just pool in rich people's pockets, you can literally lose a BTC wallet and the money is just gone forever. Over time, this will result in the number of BTC in circulation approaching zero. I don't know how long that will take. The other argument against BTC is that its essentially capitalism run amok. We already destroy the environment to extract dollars, but now with cryptocurrencies, we actually have to destroy exponentially more raw energy to fuel the monetary system itself. It's a satire of capitalism in a world of environmental catastrophe. As for the Tulips, maybe I'm interpreting the chart incorrectly, but while the options price rose to insane levels, the realized prices, for a shorter duration, still rose to 100x (options were at 200x).
- milkytron 9y ago
  > We already destroy the environment to extract dollars, but now with cryptocurrencies, we actually have to destroy exponentially more raw energy to fuel the monetary system itself. What did you mean by "extract dollars"? Also, the digital transfer of money throughout the globe and even just domestically requires a significant amount of processing (which requires raw energy) by many different entities. It makes me wonder if a transaction within a cryptocurrency payment system is actually more or less efficient, even with all of the miners.
  - SapphireSun 9y ago
    I mean literally extracting resources: mining, logging, fishing, oil extraction. As resources become more scarce, the market system causes the price to shoot up, incentivizing the completion of the process to extinction. In the case of cryptocurrencies, it's abstracted somewhat since we use electricity, but those energy resources must come from somewhere, and right now it's not renewables for the most part. I get what you're saying, but the entire idea of bitcoin is literally an exponential ramp. Each new technology that improves speed (CPU->GPU->ASIC) will be a linear step up, but mining will get exponentially harder. There are network effects from the banking world, but I don't think they should grow even as (N^2 where everyone is connected to everyone else) as they probably use something between than and a spoke and hub model.

https://stratechery.com/2017/tulips-myths-and-cryptocurrencies/ https://stratechery.com/2017/tulips-myths-and-cryptocurrenci...

by v45h 9y ago

https://stratechery.com/2017/tulips-myths-and-cryptocurrencies/ https://stratechery.com/2017/tulips-myths-and-cryptocurrenci...

SapphireSun 9y ago

This is an interesting critique. I don't deny that other alt-coins might make use of blockchains to solve other problems that aren't currency. The thing I'm taking away from the article is that it compares BTC to gold favorably, which is an interesting angle. I generally think that gold is an irrational investment, after all there is no intrinsic value to gold other than for jewelry electronics, and high tech science experiments but that's not what the gold bugs claim. However, if you kind of turn the argument on its head a bit, gold is sort of like a ground up fiat currency. It has no intrinsic value and it has no army, but it forms a focal point of public consciousness that renders it deflationary fiat. However, there are other problems with BTC even if you accept the idea of deflationary fiat. For instance, money doesn't just pool in rich people's pockets, you can literally lose a BTC wallet and the money is just gone forever. Over time, this will result in the number of BTC in circulation approaching zero. I don't know how long that will take. The other argument against BTC is that its essentially capitalism run amok. We already destroy the environment to extract dollars, but now with cryptocurrencies, we actually have to destroy exponentially more raw energy to fuel the monetary system itself. It's a satire of capitalism in a world of environmental catastrophe. As for the Tulips, maybe I'm interpreting the chart incorrectly, but while the options price rose to insane levels, the realized prices, for a shorter duration, still rose to 100x (options were at 200x).

milkytron 9y ago
> We already destroy the environment to extract dollars, but now with cryptocurrencies, we actually have to destroy exponentially more raw energy to fuel the monetary system itself. What did you mean by "extract dollars"? Also, the digital transfer of money throughout the globe and even just domestically requires a significant amount of processing (which requires raw energy) by many different entities. It makes me wonder if a transaction within a cryptocurrency payment system is actually more or less efficient, even with all of the miners.
- SapphireSun 9y ago
  I mean literally extracting resources: mining, logging, fishing, oil extraction. As resources become more scarce, the market system causes the price to shoot up, incentivizing the completion of the process to extinction. In the case of cryptocurrencies, it's abstracted somewhat since we use electricity, but those energy resources must come from somewhere, and right now it's not renewables for the most part. I get what you're saying, but the entire idea of bitcoin is literally an exponential ramp. Each new technology that improves speed (CPU->GPU->ASIC) will be a linear step up, but mining will get exponentially harder. There are network effects from the banking world, but I don't think they should grow even as (N^2 where everyone is connected to everyone else) as they probably use something between than and a spoke and hub model.