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Cryptocurrencies are the tulip mania of the 21st century

97 points by brakmic 9y ago

onewhonknocks 9y ago
What a fresh, new take on the situation. *sigh
- Tepix 9y ago
  You were being sarcastic but I agree - it's a new take. The author is saying crytocurrencies shouldn't be about their valuation, yet that's the sole focus of attention (in the media) these days. I'm bearish on Bitcoin yet bullish on Ethereum because of other factors besides their valuation such as roadmap, potential and usability. Usability is also the biggest complaint of the author. It's one of the biggest factors preventing mass adoption.
  - lawlessone 9y ago
    Eth? the one that keeps getting hacked?
    - whiskeySix 9y ago
      ETH itself has never been "hacked"...
    - teawrecks 9y ago
      ETH has never been hacked. In fact, it can't be hacked. What you mean to say is that DAPPs can be hacked. DAPP's can have unintended functionality that can be exploited, but that has nothing to do with ETH. It would be like going back to the mid 90s and saying, "this World Wide Web thing will never work because it keeps getting hacked." Doesn't make any sense, it illustrates your unfamiliarity with the subject.
      - KirinDave 9y ago
        Eth hasn't been hacked, but the technical parties developing it have yet to deliver a smart contract platform which is reasonable to write a verifiable contract on. And as a consequence: contracts are being exploited either due to implementation bugs in the language or code that has no obvious testing or verification plan. In many ways this is worse. There is a lack of competence in executing on the single most important feature of Etherium: it's ability to home other cryptocurrency. And without this, what exactly is the value eth adds? To me, this is an attempt to control and force the ecosystem. It's there to facilitate overvalued and underveted ICos and sidecar it as a revenue stream. It's not there to build something sustainable, it's there to extract value. If they cared about sustainability, the lack of rigor and correcness in eth contract building tools would be seen as a crisis and it would be much closer to resolution.
      - grubles 9y ago
        "On Wednesday 19th July, 2017 a bug found in the multi-signature wallet ("multi-sig") code used as part of Parity Wallet software was exploited by parties unknown. As of the time of writing, three wallet accounts holding large balances of ETH have been compromised and the balances moved into accounts held by the attacker." https://blog.ethcore.io/the-multi-sig-hack-a-postmortem/ https://blog.ethcore.io/the-multi-sig-hack-a-postmortem/
        StronglyTyped 9y ago
        Parity is a 3rd-party wallet application and is not Ethereum.
        grubles 9y ago
        Parity accounts for roughly 5,000 of all Ethereum nodes (of which there is no "official" "1st-party" implementation) [0]. As a result of being so popular, Parity users were collectively robbed of $30,000,000 of Ether due to the multisignature (typically used to secure funds versus single-signature-required transacting) smart contract bug. [0]https://www.ethernodes.org/network/1 https://www.ethernodes.org/network/1 [1]https://www.coindesk.com/30-million-ether-reported-stolen-parity-wallet-breach/ https://www.coindesk.com/30-million-ether-reported-stolen-pa...
  - brosirmandude 9y ago
    There are a few altcoins out there focusing on ease of use and trying to bring in users/early adopters who are not just crypto-junkies. The ones I can think off of the top of my head are: - DASH (Digital Cash) - Vertcoin - NAVcoin Of those, DASH is probably the most likely in my opinion to eventually challenge bitcoin or ETH.
matthberg 9y ago
Looks like the site is inaccessible due to resource limits being reached.
- Tepix 9y ago
  Go to google and enter cache:devolutionreview.com/bearish-on-bitcoin/
kolbe 9y ago
I thought deep investigation into 'tulip mania' revealed it wasn't nearly as severe as people claimed. If bitcoin really is worthless, then it would have an unprecedented place in bubble history.
random_rr 9y ago
Tulip references are the tulip mania of the 21st century.
- shakestheclown 9y ago
  Disagree! Tulip references are still a buy for the forseeable future.
  - rdiddly 9y ago
    Regardless of whether tulip references are in a bubble, there still remains intrinsic value in a decentralized system that can transfer a tulip reference halfway around the world without fees or government interference.
forestjc 9y ago
cached version : https://webcache.googleusercontent.com/search?q=cache:https://devolutionreview.com/bearish-on-bitcoin/ https://webcache.googleusercontent.com/search?q=cache:https:...
sboselli 9y ago
I consider this clickbait at this point. This is the exact same thing that has been said during every single boom in Bitcoin's history. You may like Bitcoin or not, but the concepts of cryptocurrencies and the technical development that the blockchain represents are here to stay. They are being adopted left and right by the banking sector all around the world.
- mannykannot 9y ago
  And tulips are still being bought and sold. Bubbles tend to have a life of their own, regardless of the MacGuffin they are organized around. https://en.wikipedia.org/wiki/MacGuffin https://en.wikipedia.org/wiki/MacGuffin I don't know about cryptocurrencies in general, but ICOs seem to me to be mostly foam.
  - dnautics 9y ago
    Bubbles also tend to be driven by leveraged investment. See kindleberger.
- Spellman 9y ago
  Saying cryptocurrencies have technical/economic value and that they are in a bubble of inflated value can both be true. I've seen it likened to the Dot com bubble. Sure several groundbreaking titans of the Internet were founded during that time. They are valued as major players in the world economy. But there were many more that were inflated and the sector as a whole was inflated. Now, if you're a savvy enough investor to be able to pick the eventual winners during a bubble, you'll come out great even after the crash. But if not, then you're just gambling. And the house will eventually win.
- loceng 9y ago
  "... the concepts of cryptocurrencies and the technical development that the blockchain represents are here to stay. They are being adopted left and right by the banking sector all around the world." Fully agree - I don't agree however with how the most popular (which is the reason they're popular)a and how they are incentivized to transfer wealth unreasonably, wealth transferred weighted to the earlier you're an adopter. It's a global, decentralized Ponzi-like scheme. The banking sector are 'adopting' them as any large institution has a budget to try to understand something. All Fortune 1000 companies have money to play around and they'll need to be prepared for blockchain - however don't confuse that with a vote specifically for Bitcoin or Ethereum's Ether.
saosebastiao 9y ago
I love how if you think something is a bubble, you can just compare it to any bubble in the past, ignoring all of the nuances. If you want a parallel to Tulip Mania, you have Beanie Babies. It was pure asset inflation for the sake of asset inflation. There was no innovation (except in markets for distribution of the asset), just wild speculation on things that were almost completely useless. I do think cryptocurrency is in a bubble, but I see it far closer to Railway Mania or the Dot Com bubble. In both cases there is a clear cut demonstration of potential utility even pre-bubble, meaning there very likely a post-bubble future for the technology, even if the landscape changes drastically in the meantime. Railway mania in particular had plenty of failures, but it also had many companies that were viable but just overvalued, and even beyond that, there were plenty of companies that thrived post bubble. I have my own speculations as to who will come out alive when the bubble crashes, and it certainly wont be anything tied to "smart" contracts, which has been the source of most of the ridiculous market behavior as of late (ERC20 especially). Others will survive on their merits, and I'll say this much: If it isn't low latency, low energy consumption, highly liquid, and traceable, it's as good as dead.
- deleted 9y ago
  [deleted]
- cm2187 9y ago
  I am not sure I would compare the invention of the internet or the development of railways to cryptocurrencies. At best, cryptocurrencies are a very minor technological development.
- benjaminjackman 9y ago
  > Others will survive on their merits, and I'll say this much: If it isn't low latency, low energy consumption, highly liquid, and traceable, it's as good as dead. What are a few things that pass those criterion and hence have a chance at living in your estimation?
- taw55 9y ago
  Why is this comment downvoted? (Honest question)
adventured 9y ago
Internet companies are the tulip mania of the 21st century. Or at least that's what I was being told at the start of the 21st century. These people should get together and settle on the tulip for the 21st century. As with the Internet company scenario, the tulip forecast short-term is partially correct. Long-term, as with the Internet, what comes next will be far, far more valuable and globally so. Blockchain technology will touch, essentially, every person on the planet. It doesn't matter if the successful rider is Bitcoin or CoinX, just as it didn't matter if it was Sun Microsystems or Webvan or Dr Koop.com or Lycos that made the most off the potential of the Internet. http://money.cnn.com/2000/11/09/technology/overview/ http://money.cnn.com/2000/11/09/technology/overview/
valarauca1 9y ago
Is there innovation in Block Chain? Yes. Are crypto-currencies over inflated? Yes. We can see the path from commodity currency, to paper, to fiat was a long and messy road history makes this clear. While in all likelihood crypto may very well supplant fiat the likelihood it'll happen in 1-2 generations is slim. Furthermore if history is a guide the replacement of Fiat by crypto will likely happen by mistake, or in such a small way few will notice.
- dalanmiller 9y ago
  What are the obstacles to replacing Fiat? I think people underestimate the combination of payment method and value, but I also just haven't heard a good argument against.
  - valarauca1 9y ago
    Okay here is one: We haven't. A strong argument can be made the USD (and most the world's curreines) are backed by oil as oil may only be exchanged for USD. Furthermore inflation tracks oil sale perfectly since the petro-dollar started.
- taw55 9y ago
  Worth adding that cryptoc as a method does not exclude fiat creation. That's an orthogonal distinction.
tw1010 9y ago
We're at the peak of the Gartner's Hype Cycle for comparisons between tulip mania and bitcoin.
rb808 9y ago
BTC was the one and only crypto currency to exist I'd think it has some value. However when there are many crypto currencies why does BTC have any value? Eg if ETH starts being used for most transactions, and BTC started crashing in value would anyone feel a need to keep it?
- stevenmays 9y ago
  This argument makes no sense. "If the euro exists, why does the dollar have value?" Edit: The above is a rhetorical question.
  - dragandj 9y ago
    Because both currencies have monopoly in two highly developed economies. I guarantee you that the exact moment the government crashes or drops support for the currency, that currency becomes worth zero. Happened many times in history. However, I bet the chance of either US or EU collapsing is tiny.
    - stevenmays 9y ago
      My comment was rephrasing the OP so they'd understand why they're argument was wrong, not an actual opinion.
      - dragandj 9y ago
        Sorry for quick shallow reading on my part.
  - flunhat 9y ago
    Because you need it to pay taxes in European nations?
  - runeks 9y ago
    Because the Euro and the US Dollar are legal tender in their respective jurisdictions, thus giving them a competitive edge over other types of money, and — perhaps more importantly — because capital gains are calculated using each currency as a reference in the jurisdiction where it’s legal tender. So, if you invest in Euros in the US, and the dollar falls relative to the Euro, you owe money to the IRS — and vice verse for the Euro in Euro-countries. It’s difficult for competing currencies to gain traction when you owe money if the legal tender drops in value (relative to the competing currency).
stretchwithme 9y ago
Tulip mania was caused by the government changing futures contracts into options. The mania happened in these financial instruments, not actual tulip bulb prices. https://en.wikipedia.org/wiki/Tulip_mania#Legal_changes https://en.wikipedia.org/wiki/Tulip_mania#Legal_changes Many bubbles are caused by government actions. Our own housing bubble was fomented by numerous bad policies. Bitcoin is not a creature of government but is actively opposed by many of them.
- mads 9y ago
  But it doesn't mean that the bubble is not there. Governments don't create bubbles. Human nature does.
  - deleted 9y ago
    [deleted]
  - Synaesthesia 9y ago
    If you’ve been in bitcoin long enough you’ve seen several boom/bust cycles, so it would hardly be surprising. And it’s auite unpredictable. Suppose the US enacted laws similar to what China just did, it could cause a crash. But I still thing they will always have some value.
  - runeks 9y ago
    > Governments don't create bubbles. Human nature does. And yet, OP just provided evidence of a case where, previously, we assumed a specific asset bubble was caused by "human nature", but in fact it looks like it was created through the government inadvertently creating risk-free speculation in options contracts for this very asset.
- runeks 9y ago
  Clickable link: https://en.wikipedia.org/wiki/Tulip_mania#Legal_changes https://en.wikipedia.org/wiki/Tulip_mania#Legal_changes (for the copy/paste-challenged) By the way, this is a really interesting argument. I’m surprised it hasn’t be pointed out before. Paper link: https://link.springer.com/article/10.1007%2Fs11127-006-9074-4 https://link.springer.com/article/10.1007%2Fs11127-006-9074-...
wslh 9y ago
The are many many angles to look at cryptocurrencies that make that assertion not true. For example, beyond the ICO mania, cryptocurrencies make the dream of a global Kickstarter possible. Many people from developed countries don't realize how difficult is to have something like this globally. Another important difference is that part of the community is self sustainable and doesn't depend on external funding.
- kensai 9y ago
  But the ICO mania is exactly this global Kickstarter you mention. ;) The main problem with ICOs is that there are not many independent auditing organisations. I know only of ICOrating, but even this seems inadequate.
  - wslh 9y ago
    > The main problem with ICOs is that there are not many independent auditing organisations. That is right but we are talking about a "thing" that is completely new. Future ICOs will have more due diligence, that is natural and it is unfeasible that they can continue with just a whitepaper in place. BTW, one sector in my company works specifically with ICOs and we are working with some real companies, doing and selling real products, and they plan to launch their ICOs in the next 6 months.
EthanHeilman 9y ago
Bitcoin has existed for eight years[0] at this point, other cryptocurrencies, such as litecoin, have existed for six years[1]. Tulip mania was fairly short lived with its peak lasting only a few months (November to May)[2]. Yes, the hype is overwhelming but I think tulip mania is bad comparison, a better comparison would be AI winters or tech bubbles. [0]: https://en.wikipedia.org/wiki/Bitcoin https://en.wikipedia.org/wiki/Bitcoin [1]: https://en.wikipedia.org/wiki/List_of_cryptocurrencies https://en.wikipedia.org/wiki/List_of_cryptocurrencies [2]: https://en.wikipedia.org/wiki/Tulip_mania#History https://en.wikipedia.org/wiki/Tulip_mania#History
- pavel_lishin 9y ago
  What's an AI winter?
  - grzm 9y ago
    I believe they're referring to "a period of reduced funding and interest in artificial intelligence research." https://en.wikipedia.org/wiki/AI_winter https://en.wikipedia.org/wiki/AI_winter
- ovulator 9y ago
  Tulips had existed for a long time too. Neither tulips nor bitcoin are worthless, both are/were just extremely over valued. The current surge in bitcoin pricing has only really started from May of this year. The last time this happened with bitcoin about 4 years ago the surge only lasted a couple of months.
  - EthanHeilman 9y ago
    Tulip supply is inflationary since tulips create more tulips. Bitcoin is more similar to the market over Superman #1 than Tulips, as Bitcoin has a known and fixed supply. However neither Superman #1 nor Tulips are not as liquid or as difficult to counterfeit as Bitcoin. In fact there has never existed a collectible as difficult to counterfeit as Bitcoin.
- 9y ago
jcfrei 9y ago
Bitcoin certainly has an intrinsic value (because it is a globally accessible medium of exchange). However just like gold its value is also most likely way above its intrinsic value. The intrinsic value of gold primarily consists of industrial applications + jewelry. Compare the price of 1kg of gold to the price of 1kg of palladium: It's $42k vs $29.5k, although palladium is much more important for industrial applications and less common in the earth's crust (https://en.wikipedia.org/wiki/Abundance_of_elements_in_Earth%27s_crust https://en.wikipedia.org/wiki/Abundance_of_elements_in_Earth...). So why does gold have a much higher price? Because people continue to believe in it as a way to store value. The same thing is happening with bitcoin. As long as people believe bitcoin will be useful as an asset the price will stay high. But because of that, bitcoin is a speculative asset just like gold.
- rdiddly 9y ago
  I seem to recall that the Lakota people and specifically Black Elk would refer to gold as "the yellow metal that drives the wasichus" [white people] "crazy." They had no use for it whatsoever, so its value to them was 0.
Ologn 9y ago
If we look at all of history up until recent times (let's say until 1971), currencies were simply commodities with certain properties. The properties that made a commodity a good currency were portability, uniformity, divisibility and durability. Commodities have value because they are useful. A pear is useful because I can eat it. A shirt is useful because I can wear it. Gold is useful because I can use it to conduct electricity or have my tooth filled. Since gold is portable, uniform, divisible and durable, it makes a good currency too. Up until 1971, people carried around little pieces of paper (even more portable than gold) redeemable for gold as a kind of currency. Cryptocoins are worthless. They have no value. The proponents of cryptocoins cast about the world looking for commodities with value to compare cryptocoins to and found none. But then they came across the post-1971 dollar/euro. It is not immediately clear why these pieces of paper are being used post-1971. Seizing on this confusion, the cryptocoin advocates point to the one thing in the world they could find without obvious value and say "we're just like this - but better". Another gulf of confusion they exploit - they tell us technical people that this has value for financial reasons we wouldn't understand as technical people. Then they go to the financial people and tell them this blockchain technology is too complex for them to understand, but it's valuable. As few people have a foot in both worlds, it's a gulf for this scam to walk into. The market cap for Bitcoins, Ethereum, Ripple etc. is $137 billion which is absurd. Dogecoin is supposed to be worth $100 million despite its creator coming out and saying it was a joke and this valuation is absurd. Charlie Munger, Warren Buffett, Jamie Dimon all have noted how Bitcoin is, as Munger puts it, "rat poison". I witnessed the subprime mortgage bubble in 2008, the dot-com bubble in 2000, and now we have another one. Whereas Pets.com or a suburban development had some value, albeit overinflated, the $130 billion crypto"currency" market cap is absurd. It is going to crash to near the $0 mark at some point. As Keynes noted though, markets can remain irrational longer than you and I can remain solvent.
- taw55 9y ago
  What you describe (money as proxy for commodity) is one school of thought that is increasingly under attack in academic circles. See for instance Money by Eric Lonergan; Debt by David Graeber; Money, The Unauthorized Biography by Felix Martin; Theory Of The Monetary Circuit by Augusto Graziani; Soft Currency Economics by Warren Mossler; Creating Economic Order by Michael Hudson; Debt and Economic Renewal in the Ancient Near East by Michael Hudson. These argue that accounting systems (and even writing, according to some) grew out of interpersonal debt/credit relations. Money then grew out of these accounting systems, as a token representation of the abstract accounting entries. In this view, money is fundamentally a kind of social contract, rather than a representation of some stored potential trade-good.
satoshinotamoto 9y ago
Hacker News teaches me new things daily, see I thought Bitcoin was a decentralized payment network, that is a solution to a class of distributed network communication problems known as Byzantine generals problem. I did not realize Bitcoin was actually a Plant or more specifically a flowers bulb. I have been using computers my whole life, I had no clue I could run flowers on my machine, also flowers would allow me to create value using electricity, and send value over TCP/IP without a trusted third party. Go ahead and sell your bitcoin or whatever the fuck you want to do because your clearly too dumb to understand a protocol, or the abilities a protocol can provide. Wait a minute Bitcoin can't be a flower, I mean it doesn't die during the winter, also my cat has never tried to eat it.
eaoliver 9y ago
China is already clamping down on BTC. Wait till the US intelligence agencies find that it's being used by ISIS (or some other villain du jour) to fund/support domestic terrorism. When Coinbase and other exchanges are regulated out of existence and no US-based corporation can legally transact in BTC, the price of BTC against major currencies will collapse. Ignoring the price of BTC, I would bet against Bitcoin purely on technical grounds. If the transaction fee history is correct [1], then it would suggest that the economic feasibility of Bitcoin as a payment service diminishes as it scales, and, with a peak mean transaction fee of nearly $9 USD last month, the blockchain cannot even support its own current popularity. [1] https://bitinfocharts.com/comparison/transactionfees-btc-eth-bch-ltc.html#6m https://bitinfocharts.com/comparison/transactionfees-btc-eth...
PaulAJ 9y ago
Today I learned that the tulip mania wasn't real. http://press.uchicago.edu/ucp/books/book/chicago/T/bo5414939.html http://press.uchicago.edu/ucp/books/book/chicago/T/bo5414939...
nodamage 9y ago
I asked this question in another thread but really haven't seen a satisfactory response yet: David Karpeles admitted at trial to running bots on Mt. Gox, and such bots were implicated in the rise of Bitcoin's price up to $1000 in 2013. Bitcoin has experienced a similar jump in value over the past year. If Mt. Gox successfully manipulated the price of Bitcoin using bots in the past, how do we know other exchanges aren't doing the exact same thing right now? Don't get me wrong, I think there is potential value in Bitcoin as a distributed/frictionless method of money transfer, however as an asset/investment I think it's extremely risky and I'm not necessarily sure the run up to $4000 reflects its underlying value: the ecosystem is largely unregulated and as such there is a greater risk of fraudulent activity and manipulation that would not be permitted under a regulated market. Especially if the pseudonymous nature of Bitcoin transactions makes such manipulation harder to detect. I am curious if anyone who has recently put money into Bitcoin has thought about this, and if so, what made them to decide to invest anyway? Am I just being paranoid?
- mrb 9y ago
  «how do we know other exchanges aren't doing the exact same thing right now» It's very simple. Before 2013 MtGox was the largest Bitcoin exchange in the world with the most volume (something like 80-90% of the market—I don't remember the exact numbers). They effectively defined the price and the bot could control it. Nowadays there are dozens/hundreds of exchanges around the world. One bot trying to increase the price on one exchange would get severely arbitraged through other exchanges, and the cheating exchange would be quickly driven into insolvency. Also Mark Karpeles was a sole proprietor of a private company. He had free reigns and no one to answer to. It was easy for him to decide to run this fraudulent bot. The chance of the same illegal manipulation happening at very high profiles exchanges like Coinbase/GDAX or Gemini who are VC-funded and run by respectable executives is very low.
  - nodamage 9y ago
    So you think there's zero chance of collusion between exchanges as well? Isn't there some evidence that bots are currently active on major exchanges? I keep hearing about suspicious activity on Bitfenix... aren't they one of the largest exchanges? > The chance of the same illegal manipulation happening at very high profiles exchanges like Coinbase/GDAX or Gemini who are VC-funded and run by respectable executives is very low. Yeah, I don't expect this to be occurring at US companies who presumably could be prosecuted for fraud. But what about other companies that are based in countries with less regulation (or with regulators that could be paid to look the other way)?
mrb 9y ago
«Instead of the vastly changed future with digital currencies and the breakthrough of the Blockchain technology we were promised, we’ve just been stuck with a huge bubble and growing complications» This guy simply needs more patience. The social & economic changes that cryptocurrencies sparked are barely beginning. They will take decades to fully unfold. Just because "it" hasn't happened yet doesn't necessarily mean cryptos are worthless and will all crash to zero. It is true, however, that there is a bubble. But there are always bubbles at various points of the development of most revolutionary technologies. And Bitcoin's bubbles are becoming tamer over time.¹ In fact they are becoming tame enough that Bitcoin's returns are sometimes beaten by blue chip stocks: in 2016 AMD went up 420% but BTC only 170%. ¹ It took 1 month to go 10× from $120 to $1200 in Nov 2013, but 1 year to go 10× from $490 to $4900 in Aug 2017.
jondubois 9y ago
I was skeptical of Bitcoin when I first heard of it. Now I think that it's here to stay. I don't think ICOs are a bubble either (not all of them at least). I think that we need more ICOs to increase the capacity of the internet of cryptocurrencies. Digital currencies address a real problem; government and institutional manipulation of money. Traditionally, everyone has been forced to drink from the same pond; world governments decided what the economic environment would be in any given country - Because of this, some generations or specific groups of people have been set up for failure. If you're born in a country whose monetary policy or economic environment is working against you; cryptocurrencies provide an idealistic escape hatch; an alternative way of valuing your labour and your potential. The traditional fiat financial system has been corrupted by an army of traders, venture capitalists, investment bankers, bureaucrats, lobbyists and corrupt politicians; their actions have damaged the public perception of fiat currencies and have been devaluing them. Fiat currencies are no longer seen as the product of meritocracy; but as the product of luck or corruption. Regular people are not the ones driving up the price of cryptocurrencies; they're driven up by rich people who are (perhaps inadvertently) voting against the same system which made them rich in the first place. Maybe this is what Karl Marx had in mind when he suggested that capitalism could destroy itself. Bitcoin is not a bubble; a true bubble grows until it pops; then it stops growing. Bitcoin has popped many times in the past and has always recovered.
- sireat 9y ago
  Setting BTC aside for a moment how are ICOs not a bubble? There is no ICO that has not raised way more money than necessary. Then you add that most ICOs are little more than a white papers with some pedigree and you have the makings of a bubble.
legohead 9y ago
Scenario: The US bans all banks and credit agencies from transferring money to/from bitcoin exchanges. Most of the other powerful countries follow suit. Now what?
- jondubois 9y ago
  Investment would shift to 'weak' countries which support cryptocurrencies and potentially cause a flip the economic order.
- bdamm 9y ago
  Bitcoin investors sue the government and win.
arisAlexis 9y ago
Tulips had no innovation. Not sure why techies don't get it. Its so simple that this is a wrong comparison but every two months someone writes an article about it. It's beyond me.

97 points by brakmic 9y ago

onewhonknocks 9y ago

What a fresh, new take on the situation. *sigh

Tepix 9y ago
You were being sarcastic but I agree - it's a new take. The author is saying crytocurrencies shouldn't be about their valuation, yet that's the sole focus of attention (in the media) these days. I'm bearish on Bitcoin yet bullish on Ethereum because of other factors besides their valuation such as roadmap, potential and usability. Usability is also the biggest complaint of the author. It's one of the biggest factors preventing mass adoption.
- lawlessone 9y ago
  Eth? the one that keeps getting hacked?
  - whiskeySix 9y ago
    ETH itself has never been "hacked"...
  - teawrecks 9y ago
    ETH has never been hacked. In fact, it can't be hacked. What you mean to say is that DAPPs can be hacked. DAPP's can have unintended functionality that can be exploited, but that has nothing to do with ETH. It would be like going back to the mid 90s and saying, "this World Wide Web thing will never work because it keeps getting hacked." Doesn't make any sense, it illustrates your unfamiliarity with the subject.
    - KirinDave 9y ago
      Eth hasn't been hacked, but the technical parties developing it have yet to deliver a smart contract platform which is reasonable to write a verifiable contract on. And as a consequence: contracts are being exploited either due to implementation bugs in the language or code that has no obvious testing or verification plan. In many ways this is worse. There is a lack of competence in executing on the single most important feature of Etherium: it's ability to home other cryptocurrency. And without this, what exactly is the value eth adds? To me, this is an attempt to control and force the ecosystem. It's there to facilitate overvalued and underveted ICos and sidecar it as a revenue stream. It's not there to build something sustainable, it's there to extract value. If they cared about sustainability, the lack of rigor and correcness in eth contract building tools would be seen as a crisis and it would be much closer to resolution.
    - grubles 9y ago
      "On Wednesday 19th July, 2017 a bug found in the multi-signature wallet ("multi-sig") code used as part of Parity Wallet software was exploited by parties unknown. As of the time of writing, three wallet accounts holding large balances of ETH have been compromised and the balances moved into accounts held by the attacker." https://blog.ethcore.io/the-multi-sig-hack-a-postmortem/ https://blog.ethcore.io/the-multi-sig-hack-a-postmortem/
      - StronglyTyped 9y ago
        Parity is a 3rd-party wallet application and is not Ethereum.
        grubles 9y ago
        Parity accounts for roughly 5,000 of all Ethereum nodes (of which there is no "official" "1st-party" implementation) [0]. As a result of being so popular, Parity users were collectively robbed of $30,000,000 of Ether due to the multisignature (typically used to secure funds versus single-signature-required transacting) smart contract bug. [0]https://www.ethernodes.org/network/1 https://www.ethernodes.org/network/1 [1]https://www.coindesk.com/30-million-ether-reported-stolen-parity-wallet-breach/ https://www.coindesk.com/30-million-ether-reported-stolen-pa...
- brosirmandude 9y ago
  There are a few altcoins out there focusing on ease of use and trying to bring in users/early adopters who are not just crypto-junkies. The ones I can think off of the top of my head are: - DASH (Digital Cash) - Vertcoin - NAVcoin Of those, DASH is probably the most likely in my opinion to eventually challenge bitcoin or ETH.

matthberg 9y ago

Looks like the site is inaccessible due to resource limits being reached.

Tepix 9y ago
Go to google and enter cache:devolutionreview.com/bearish-on-bitcoin/

kolbe 9y ago

I thought deep investigation into 'tulip mania' revealed it wasn't nearly as severe as people claimed. If bitcoin really is worthless, then it would have an unprecedented place in bubble history.

random_rr 9y ago

Tulip references are the tulip mania of the 21st century.

shakestheclown 9y ago
Disagree! Tulip references are still a buy for the forseeable future.
- rdiddly 9y ago
  Regardless of whether tulip references are in a bubble, there still remains intrinsic value in a decentralized system that can transfer a tulip reference halfway around the world without fees or government interference.

forestjc 9y ago

cached version : https://webcache.googleusercontent.com/search?q=cache:https://devolutionreview.com/bearish-on-bitcoin/ https://webcache.googleusercontent.com/search?q=cache:https:...

sboselli 9y ago

I consider this clickbait at this point. This is the exact same thing that has been said during every single boom in Bitcoin's history. You may like Bitcoin or not, but the concepts of cryptocurrencies and the technical development that the blockchain represents are here to stay. They are being adopted left and right by the banking sector all around the world.

mannykannot 9y ago
And tulips are still being bought and sold. Bubbles tend to have a life of their own, regardless of the MacGuffin they are organized around. https://en.wikipedia.org/wiki/MacGuffin https://en.wikipedia.org/wiki/MacGuffin I don't know about cryptocurrencies in general, but ICOs seem to me to be mostly foam.
- dnautics 9y ago
  Bubbles also tend to be driven by leveraged investment. See kindleberger.
Spellman 9y ago
Saying cryptocurrencies have technical/economic value and that they are in a bubble of inflated value can both be true. I've seen it likened to the Dot com bubble. Sure several groundbreaking titans of the Internet were founded during that time. They are valued as major players in the world economy. But there were many more that were inflated and the sector as a whole was inflated. Now, if you're a savvy enough investor to be able to pick the eventual winners during a bubble, you'll come out great even after the crash. But if not, then you're just gambling. And the house will eventually win.
loceng 9y ago
"... the concepts of cryptocurrencies and the technical development that the blockchain represents are here to stay. They are being adopted left and right by the banking sector all around the world." Fully agree - I don't agree however with how the most popular (which is the reason they're popular)a and how they are incentivized to transfer wealth unreasonably, wealth transferred weighted to the earlier you're an adopter. It's a global, decentralized Ponzi-like scheme. The banking sector are 'adopting' them as any large institution has a budget to try to understand something. All Fortune 1000 companies have money to play around and they'll need to be prepared for blockchain - however don't confuse that with a vote specifically for Bitcoin or Ethereum's Ether.

saosebastiao 9y ago

I love how if you think something is a bubble, you can just compare it to any bubble in the past, ignoring all of the nuances. If you want a parallel to Tulip Mania, you have Beanie Babies. It was pure asset inflation for the sake of asset inflation. There was no innovation (except in markets for distribution of the asset), just wild speculation on things that were almost completely useless. I do think cryptocurrency is in a bubble, but I see it far closer to Railway Mania or the Dot Com bubble. In both cases there is a clear cut demonstration of potential utility even pre-bubble, meaning there very likely a post-bubble future for the technology, even if the landscape changes drastically in the meantime. Railway mania in particular had plenty of failures, but it also had many companies that were viable but just overvalued, and even beyond that, there were plenty of companies that thrived post bubble. I have my own speculations as to who will come out alive when the bubble crashes, and it certainly wont be anything tied to "smart" contracts, which has been the source of most of the ridiculous market behavior as of late (ERC20 especially). Others will survive on their merits, and I'll say this much: If it isn't low latency, low energy consumption, highly liquid, and traceable, it's as good as dead.

deleted 9y ago
[deleted]
cm2187 9y ago
I am not sure I would compare the invention of the internet or the development of railways to cryptocurrencies. At best, cryptocurrencies are a very minor technological development.
benjaminjackman 9y ago
> Others will survive on their merits, and I'll say this much: If it isn't low latency, low energy consumption, highly liquid, and traceable, it's as good as dead. What are a few things that pass those criterion and hence have a chance at living in your estimation?
taw55 9y ago
Why is this comment downvoted? (Honest question)

adventured 9y ago

Internet companies are the tulip mania of the 21st century. Or at least that's what I was being told at the start of the 21st century. These people should get together and settle on the tulip for the 21st century. As with the Internet company scenario, the tulip forecast short-term is partially correct. Long-term, as with the Internet, what comes next will be far, far more valuable and globally so. Blockchain technology will touch, essentially, every person on the planet. It doesn't matter if the successful rider is Bitcoin or CoinX, just as it didn't matter if it was Sun Microsystems or Webvan or Dr Koop.com or Lycos that made the most off the potential of the Internet. http://money.cnn.com/2000/11/09/technology/overview/ http://money.cnn.com/2000/11/09/technology/overview/

valarauca1 9y ago

Is there innovation in Block Chain? Yes. Are crypto-currencies over inflated? Yes. We can see the path from commodity currency, to paper, to fiat was a long and messy road history makes this clear. While in all likelihood crypto may very well supplant fiat the likelihood it'll happen in 1-2 generations is slim. Furthermore if history is a guide the replacement of Fiat by crypto will likely happen by mistake, or in such a small way few will notice.

dalanmiller 9y ago
What are the obstacles to replacing Fiat? I think people underestimate the combination of payment method and value, but I also just haven't heard a good argument against.
- valarauca1 9y ago
  Okay here is one: We haven't. A strong argument can be made the USD (and most the world's curreines) are backed by oil as oil may only be exchanged for USD. Furthermore inflation tracks oil sale perfectly since the petro-dollar started.
taw55 9y ago
Worth adding that cryptoc as a method does not exclude fiat creation. That's an orthogonal distinction.

tw1010 9y ago

We're at the peak of the Gartner's Hype Cycle for comparisons between tulip mania and bitcoin.

rb808 9y ago

BTC was the one and only crypto currency to exist I'd think it has some value. However when there are many crypto currencies why does BTC have any value? Eg if ETH starts being used for most transactions, and BTC started crashing in value would anyone feel a need to keep it?

stevenmays 9y ago
This argument makes no sense. "If the euro exists, why does the dollar have value?" Edit: The above is a rhetorical question.
- dragandj 9y ago
  Because both currencies have monopoly in two highly developed economies. I guarantee you that the exact moment the government crashes or drops support for the currency, that currency becomes worth zero. Happened many times in history. However, I bet the chance of either US or EU collapsing is tiny.
  - stevenmays 9y ago
    My comment was rephrasing the OP so they'd understand why they're argument was wrong, not an actual opinion.
    - dragandj 9y ago
      Sorry for quick shallow reading on my part.
- flunhat 9y ago
  Because you need it to pay taxes in European nations?
- runeks 9y ago
  Because the Euro and the US Dollar are legal tender in their respective jurisdictions, thus giving them a competitive edge over other types of money, and — perhaps more importantly — because capital gains are calculated using each currency as a reference in the jurisdiction where it’s legal tender. So, if you invest in Euros in the US, and the dollar falls relative to the Euro, you owe money to the IRS — and vice verse for the Euro in Euro-countries. It’s difficult for competing currencies to gain traction when you owe money if the legal tender drops in value (relative to the competing currency).

stretchwithme 9y ago

Tulip mania was caused by the government changing futures contracts into options. The mania happened in these financial instruments, not actual tulip bulb prices. https://en.wikipedia.org/wiki/Tulip_mania#Legal_changes https://en.wikipedia.org/wiki/Tulip_mania#Legal_changes Many bubbles are caused by government actions. Our own housing bubble was fomented by numerous bad policies. Bitcoin is not a creature of government but is actively opposed by many of them.

mads 9y ago
But it doesn't mean that the bubble is not there. Governments don't create bubbles. Human nature does.
- deleted 9y ago
  [deleted]
- Synaesthesia 9y ago
  If you’ve been in bitcoin long enough you’ve seen several boom/bust cycles, so it would hardly be surprising. And it’s auite unpredictable. Suppose the US enacted laws similar to what China just did, it could cause a crash. But I still thing they will always have some value.
- runeks 9y ago
  > Governments don't create bubbles. Human nature does. And yet, OP just provided evidence of a case where, previously, we assumed a specific asset bubble was caused by "human nature", but in fact it looks like it was created through the government inadvertently creating risk-free speculation in options contracts for this very asset.
runeks 9y ago
Clickable link: https://en.wikipedia.org/wiki/Tulip_mania#Legal_changes https://en.wikipedia.org/wiki/Tulip_mania#Legal_changes (for the copy/paste-challenged) By the way, this is a really interesting argument. I’m surprised it hasn’t be pointed out before. Paper link: https://link.springer.com/article/10.1007%2Fs11127-006-9074-4 https://link.springer.com/article/10.1007%2Fs11127-006-9074-...

wslh 9y ago

The are many many angles to look at cryptocurrencies that make that assertion not true. For example, beyond the ICO mania, cryptocurrencies make the dream of a global Kickstarter possible. Many people from developed countries don't realize how difficult is to have something like this globally. Another important difference is that part of the community is self sustainable and doesn't depend on external funding.

kensai 9y ago
But the ICO mania is exactly this global Kickstarter you mention. ;) The main problem with ICOs is that there are not many independent auditing organisations. I know only of ICOrating, but even this seems inadequate.
- wslh 9y ago
  > The main problem with ICOs is that there are not many independent auditing organisations. That is right but we are talking about a "thing" that is completely new. Future ICOs will have more due diligence, that is natural and it is unfeasible that they can continue with just a whitepaper in place. BTW, one sector in my company works specifically with ICOs and we are working with some real companies, doing and selling real products, and they plan to launch their ICOs in the next 6 months.

EthanHeilman 9y ago

Bitcoin has existed for eight years[0] at this point, other cryptocurrencies, such as litecoin, have existed for six years[1]. Tulip mania was fairly short lived with its peak lasting only a few months (November to May)[2]. Yes, the hype is overwhelming but I think tulip mania is bad comparison, a better comparison would be AI winters or tech bubbles. [0]: https://en.wikipedia.org/wiki/Bitcoin https://en.wikipedia.org/wiki/Bitcoin [1]: https://en.wikipedia.org/wiki/List_of_cryptocurrencies https://en.wikipedia.org/wiki/List_of_cryptocurrencies [2]: https://en.wikipedia.org/wiki/Tulip_mania#History https://en.wikipedia.org/wiki/Tulip_mania#History

pavel_lishin 9y ago
What's an AI winter?
- grzm 9y ago
  I believe they're referring to "a period of reduced funding and interest in artificial intelligence research." https://en.wikipedia.org/wiki/AI_winter https://en.wikipedia.org/wiki/AI_winter
ovulator 9y ago
Tulips had existed for a long time too. Neither tulips nor bitcoin are worthless, both are/were just extremely over valued. The current surge in bitcoin pricing has only really started from May of this year. The last time this happened with bitcoin about 4 years ago the surge only lasted a couple of months.
- EthanHeilman 9y ago
  Tulip supply is inflationary since tulips create more tulips. Bitcoin is more similar to the market over Superman #1 than Tulips, as Bitcoin has a known and fixed supply. However neither Superman #1 nor Tulips are not as liquid or as difficult to counterfeit as Bitcoin. In fact there has never existed a collectible as difficult to counterfeit as Bitcoin.
9y ago

jcfrei 9y ago

Bitcoin certainly has an intrinsic value (because it is a globally accessible medium of exchange). However just like gold its value is also most likely way above its intrinsic value. The intrinsic value of gold primarily consists of industrial applications + jewelry. Compare the price of 1kg of gold to the price of 1kg of palladium: It's $42k vs $29.5k, although palladium is much more important for industrial applications and less common in the earth's crust (https://en.wikipedia.org/wiki/Abundance_of_elements_in_Earth%27s_crust https://en.wikipedia.org/wiki/Abundance_of_elements_in_Earth...). So why does gold have a much higher price? Because people continue to believe in it as a way to store value. The same thing is happening with bitcoin. As long as people believe bitcoin will be useful as an asset the price will stay high. But because of that, bitcoin is a speculative asset just like gold.

rdiddly 9y ago
I seem to recall that the Lakota people and specifically Black Elk would refer to gold as "the yellow metal that drives the wasichus" [white people] "crazy." They had no use for it whatsoever, so its value to them was 0.

Ologn 9y ago

If we look at all of history up until recent times (let's say until 1971), currencies were simply commodities with certain properties. The properties that made a commodity a good currency were portability, uniformity, divisibility and durability. Commodities have value because they are useful. A pear is useful because I can eat it. A shirt is useful because I can wear it. Gold is useful because I can use it to conduct electricity or have my tooth filled. Since gold is portable, uniform, divisible and durable, it makes a good currency too. Up until 1971, people carried around little pieces of paper (even more portable than gold) redeemable for gold as a kind of currency. Cryptocoins are worthless. They have no value. The proponents of cryptocoins cast about the world looking for commodities with value to compare cryptocoins to and found none. But then they came across the post-1971 dollar/euro. It is not immediately clear why these pieces of paper are being used post-1971. Seizing on this confusion, the cryptocoin advocates point to the one thing in the world they could find without obvious value and say "we're just like this - but better". Another gulf of confusion they exploit - they tell us technical people that this has value for financial reasons we wouldn't understand as technical people. Then they go to the financial people and tell them this blockchain technology is too complex for them to understand, but it's valuable. As few people have a foot in both worlds, it's a gulf for this scam to walk into. The market cap for Bitcoins, Ethereum, Ripple etc. is $137 billion which is absurd. Dogecoin is supposed to be worth $100 million despite its creator coming out and saying it was a joke and this valuation is absurd. Charlie Munger, Warren Buffett, Jamie Dimon all have noted how Bitcoin is, as Munger puts it, "rat poison". I witnessed the subprime mortgage bubble in 2008, the dot-com bubble in 2000, and now we have another one. Whereas Pets.com or a suburban development had some value, albeit overinflated, the $130 billion crypto"currency" market cap is absurd. It is going to crash to near the $0 mark at some point. As Keynes noted though, markets can remain irrational longer than you and I can remain solvent.

taw55 9y ago
What you describe (money as proxy for commodity) is one school of thought that is increasingly under attack in academic circles. See for instance Money by Eric Lonergan; Debt by David Graeber; Money, The Unauthorized Biography by Felix Martin; Theory Of The Monetary Circuit by Augusto Graziani; Soft Currency Economics by Warren Mossler; Creating Economic Order by Michael Hudson; Debt and Economic Renewal in the Ancient Near East by Michael Hudson. These argue that accounting systems (and even writing, according to some) grew out of interpersonal debt/credit relations. Money then grew out of these accounting systems, as a token representation of the abstract accounting entries. In this view, money is fundamentally a kind of social contract, rather than a representation of some stored potential trade-good.

satoshinotamoto 9y ago

Hacker News teaches me new things daily, see I thought Bitcoin was a decentralized payment network, that is a solution to a class of distributed network communication problems known as Byzantine generals problem. I did not realize Bitcoin was actually a Plant or more specifically a flowers bulb. I have been using computers my whole life, I had no clue I could run flowers on my machine, also flowers would allow me to create value using electricity, and send value over TCP/IP without a trusted third party. Go ahead and sell your bitcoin or whatever the fuck you want to do because your clearly too dumb to understand a protocol, or the abilities a protocol can provide. Wait a minute Bitcoin can't be a flower, I mean it doesn't die during the winter, also my cat has never tried to eat it.

eaoliver 9y ago

China is already clamping down on BTC. Wait till the US intelligence agencies find that it's being used by ISIS (or some other villain du jour) to fund/support domestic terrorism. When Coinbase and other exchanges are regulated out of existence and no US-based corporation can legally transact in BTC, the price of BTC against major currencies will collapse. Ignoring the price of BTC, I would bet against Bitcoin purely on technical grounds. If the transaction fee history is correct [1], then it would suggest that the economic feasibility of Bitcoin as a payment service diminishes as it scales, and, with a peak mean transaction fee of nearly $9 USD last month, the blockchain cannot even support its own current popularity. [1] https://bitinfocharts.com/comparison/transactionfees-btc-eth-bch-ltc.html#6m https://bitinfocharts.com/comparison/transactionfees-btc-eth...

PaulAJ 9y ago

Today I learned that the tulip mania wasn't real. http://press.uchicago.edu/ucp/books/book/chicago/T/bo5414939.html http://press.uchicago.edu/ucp/books/book/chicago/T/bo5414939...

nodamage 9y ago

I asked this question in another thread but really haven't seen a satisfactory response yet: David Karpeles admitted at trial to running bots on Mt. Gox, and such bots were implicated in the rise of Bitcoin's price up to $1000 in 2013. Bitcoin has experienced a similar jump in value over the past year. If Mt. Gox successfully manipulated the price of Bitcoin using bots in the past, how do we know other exchanges aren't doing the exact same thing right now? Don't get me wrong, I think there is potential value in Bitcoin as a distributed/frictionless method of money transfer, however as an asset/investment I think it's extremely risky and I'm not necessarily sure the run up to $4000 reflects its underlying value: the ecosystem is largely unregulated and as such there is a greater risk of fraudulent activity and manipulation that would not be permitted under a regulated market. Especially if the pseudonymous nature of Bitcoin transactions makes such manipulation harder to detect. I am curious if anyone who has recently put money into Bitcoin has thought about this, and if so, what made them to decide to invest anyway? Am I just being paranoid?

mrb 9y ago
«how do we know other exchanges aren't doing the exact same thing right now» It's very simple. Before 2013 MtGox was the largest Bitcoin exchange in the world with the most volume (something like 80-90% of the market—I don't remember the exact numbers). They effectively defined the price and the bot could control it. Nowadays there are dozens/hundreds of exchanges around the world. One bot trying to increase the price on one exchange would get severely arbitraged through other exchanges, and the cheating exchange would be quickly driven into insolvency. Also Mark Karpeles was a sole proprietor of a private company. He had free reigns and no one to answer to. It was easy for him to decide to run this fraudulent bot. The chance of the same illegal manipulation happening at very high profiles exchanges like Coinbase/GDAX or Gemini who are VC-funded and run by respectable executives is very low.
- nodamage 9y ago
  So you think there's zero chance of collusion between exchanges as well? Isn't there some evidence that bots are currently active on major exchanges? I keep hearing about suspicious activity on Bitfenix... aren't they one of the largest exchanges? > The chance of the same illegal manipulation happening at very high profiles exchanges like Coinbase/GDAX or Gemini who are VC-funded and run by respectable executives is very low. Yeah, I don't expect this to be occurring at US companies who presumably could be prosecuted for fraud. But what about other companies that are based in countries with less regulation (or with regulators that could be paid to look the other way)?

mrb 9y ago

«Instead of the vastly changed future with digital currencies and the breakthrough of the Blockchain technology we were promised, we’ve just been stuck with a huge bubble and growing complications» This guy simply needs more patience. The social & economic changes that cryptocurrencies sparked are barely beginning. They will take decades to fully unfold. Just because "it" hasn't happened yet doesn't necessarily mean cryptos are worthless and will all crash to zero. It is true, however, that there is a bubble. But there are always bubbles at various points of the development of most revolutionary technologies. And Bitcoin's bubbles are becoming tamer over time.¹ In fact they are becoming tame enough that Bitcoin's returns are sometimes beaten by blue chip stocks: in 2016 AMD went up 420% but BTC only 170%. ¹ It took 1 month to go 10× from $120 to $1200 in Nov 2013, but 1 year to go 10× from $490 to $4900 in Aug 2017.

jondubois 9y ago

I was skeptical of Bitcoin when I first heard of it. Now I think that it's here to stay. I don't think ICOs are a bubble either (not all of them at least). I think that we need more ICOs to increase the capacity of the internet of cryptocurrencies. Digital currencies address a real problem; government and institutional manipulation of money. Traditionally, everyone has been forced to drink from the same pond; world governments decided what the economic environment would be in any given country - Because of this, some generations or specific groups of people have been set up for failure. If you're born in a country whose monetary policy or economic environment is working against you; cryptocurrencies provide an idealistic escape hatch; an alternative way of valuing your labour and your potential. The traditional fiat financial system has been corrupted by an army of traders, venture capitalists, investment bankers, bureaucrats, lobbyists and corrupt politicians; their actions have damaged the public perception of fiat currencies and have been devaluing them. Fiat currencies are no longer seen as the product of meritocracy; but as the product of luck or corruption. Regular people are not the ones driving up the price of cryptocurrencies; they're driven up by rich people who are (perhaps inadvertently) voting against the same system which made them rich in the first place. Maybe this is what Karl Marx had in mind when he suggested that capitalism could destroy itself. Bitcoin is not a bubble; a true bubble grows until it pops; then it stops growing. Bitcoin has popped many times in the past and has always recovered.

sireat 9y ago
Setting BTC aside for a moment how are ICOs not a bubble? There is no ICO that has not raised way more money than necessary. Then you add that most ICOs are little more than a white papers with some pedigree and you have the makings of a bubble.

legohead 9y ago

Scenario: The US bans all banks and credit agencies from transferring money to/from bitcoin exchanges. Most of the other powerful countries follow suit. Now what?

jondubois 9y ago
Investment would shift to 'weak' countries which support cryptocurrencies and potentially cause a flip the economic order.
bdamm 9y ago
Bitcoin investors sue the government and win.

arisAlexis 9y ago

Tulips had no innovation. Not sure why techies don't get it. Its so simple that this is a wrong comparison but every two months someone writes an article about it. It's beyond me.