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That’s how markets work. Early adopters take risks that pay off when late-comers try to bet on a proven winner.

ISL 9y ago
It doesn't have to be a "bet" on a proven winner. Later investors can simply accept lower returns from a proven winner.
frozenport 9y ago
Another view is that markets are not about gambling but rather investing? For example, index matched funds grow because the economy of the world, as a whole, is growing.
- randoramax 9y ago
  That is the theory. The practice is that markets crash and people cannot retire anymore. A lot like gambling
  - imtringued 9y ago
    Markets can recover. If you invest in stock you have to consider that you may not be able to liquidate it within the next 10 years. What if the markets don't recover? If they don't recover you will have far larger problems than your stock portfolio being in the red. The machines and people don't just disappear unless there is a war. Even if you fail to do that as long as you have started investing sufficiently early enough - let's say 30 years before retirement (around 35 years old) - you probably have experienced at least one recession and recovery until retirement. If suddenly markets crash during retirement by 50% on an asset that is up by 150% does it matter? You still got away with a profit. And nobody forces you to liquidate everything at once. So sure if you plan to draw out 4% of your stocks you will have decreased your portfolio by 8% every year.
- nihonde 9y ago
  Index funds are pegged to a lot of activities that look like gambling, but the risks are somewhat hedged by a limited kind of diversification. It’s like betting every blackjack hand in the house at once (setting aside the house’s favorable odds).
  - deleted 9y ago
    [deleted]
  - greglindahl 9y ago
    Huh? If I have an S&P 500 Index fund, how is that an activity that looks like gambling, or has a limited kind of diversification? It's narrow index funds that are gambling. Not all index funds.
thkim 9y ago
no, it is not how normal markets work. a stock, bond, real estate "generates income". that's why it has value. bitcoin does not.
- ravingraven 9y ago
  A) Bitoin is not a stock, it's a currency. It'ss value lies in its utility. B) There are (a lot of) stocks that do not pay dividends and never will. There are a lot of stocks that were issued by companies that never made a profit. Both of those categories are traded with a value above zero, how do you explain that?
  - glastra 9y ago
    Bitcoin has absolutely no utility as a currency. Look at the current mempool [0] to see why. People then switch to arguing that it's a great store of value. Given its volatility this makes no sense. [0]: https://jochen-hoenicke.de/queue/#24h https://jochen-hoenicke.de/queue/#24h
    - ravingraven 9y ago
      To clarify: Bitcoin is deeply flawed, and I agree with you that Bitcoin is probably worth less than many people speculate it is worth (but not zero). Cryptocurrencies in general have a lot of utility and solve real problems.
      - Cthulhu_ 9y ago
        And yet they introduce a lot of new problems too - problems that have been solved by traditional currencies a while ago. Problems like exchange security and protection to citizens. If my bank goes bankrupt for whatever reason, the government has an insurance for up to 100K for me. When mtgox went down, everyone lost their money.
        Lunar_Lamp 9y ago
        I'm not sure I agree here. Those are definitely real issues that you've highlighted, but they're not because of crypto currency. There's no reason that a crypto-exchange cannot be as secure as a bank (or more), and that governments cannot insure crypto deposits up to some value. Those are purely problems for regulators/governments, which have been relatively slow to adapt legislation. The problems you highlight are real, and can be good reasons to favour traditional currencies, but they're also easy problems to solve - the thinking has already been done once for traditional currencies and the solutions for crypto are mostly identical.
cryptodogemoon 9y ago
Not with Bitcoin. Satoshi designed the supply to rapidly mint the majority of coins to the smallest group of users for the least amount of effort/capital/work input. It's designed to manipulate any user who joins the system after you. Satoshi could easily have chosen a linear curve to align with time, user growth, and increase in work input yet instead the manipulative log curve was chosen. Old users are now incentived to attempt to psychologically exploit new people by selling the asset for far more than the cost of production or acquisition.
- celticninja 9y ago
  You bring this up in every crypto thread. Do you have an alternative suggestion as to how it should work that could actually be implemented now in a new crypto?
  - mikepurvis 9y ago
    Isn't it fundamentally a bootstrapping problem? A state can reasonably presume to sell a new currency in exchange for older (or foreign) currency— this is similar to issuing a bond or whatever else to raise money. And there's a guarantee of value in the sense that the state will accept the currency later on as your taxes. The Bitcoin network/ecosystem has nothing to offer in this sense— there's no plausible reason for it to be "raising" money by direct sales, and no one owes it taxes. So the initial tokens were distributed based on the fact that they were mined by early adopters before the difficulty got to be too great. There is indeed a basic unfairness in this, but it's not obvious to me how to resolve it for future projects of this kind.
  - cryptodogemoon 9y ago
    A linear distribution curve that matches work/watt input. This modestly levels the playing field, although it simply allows existing capital to match the input/output. Satoshi style curves are both capital dependent and skewed disproportionately to the first to arrive within the tiny timeframe. Anti-sybil attacks would be immensely beneficial. Encouragement of honest economic activity. Scaling of bandwidth and fees. The ideal solution is a PoW that is computationally useful and desirable, BOINC, folding@home. Ethereum almost does this, but PoW algos as they exist now are anti-scale by design, where increasing computational power does not improve the network at all. The foreseeable longevity of PoW is ungodly waste, when a world wide distributed computing network has potential far far beyond brute force hash puzzles.

ISL 9y ago

It doesn't have to be a "bet" on a proven winner. Later investors can simply accept lower returns from a proven winner.

Another view is that markets are not about gambling but rather investing? For example, index matched funds grow because the economy of the world, as a whole, is growing.

randoramax 9y ago
That is the theory. The practice is that markets crash and people cannot retire anymore. A lot like gambling
- imtringued 9y ago
  Markets can recover. If you invest in stock you have to consider that you may not be able to liquidate it within the next 10 years. What if the markets don't recover? If they don't recover you will have far larger problems than your stock portfolio being in the red. The machines and people don't just disappear unless there is a war. Even if you fail to do that as long as you have started investing sufficiently early enough - let's say 30 years before retirement (around 35 years old) - you probably have experienced at least one recession and recovery until retirement. If suddenly markets crash during retirement by 50% on an asset that is up by 150% does it matter? You still got away with a profit. And nobody forces you to liquidate everything at once. So sure if you plan to draw out 4% of your stocks you will have decreased your portfolio by 8% every year.
nihonde 9y ago
Index funds are pegged to a lot of activities that look like gambling, but the risks are somewhat hedged by a limited kind of diversification. It’s like betting every blackjack hand in the house at once (setting aside the house’s favorable odds).
- deleted 9y ago
  [deleted]
- greglindahl 9y ago
  Huh? If I have an S&P 500 Index fund, how is that an activity that looks like gambling, or has a limited kind of diversification? It's narrow index funds that are gambling. Not all index funds.

thkim 9y ago

no, it is not how normal markets work. a stock, bond, real estate "generates income". that's why it has value. bitcoin does not.

ravingraven 9y ago
A) Bitoin is not a stock, it's a currency. It'ss value lies in its utility. B) There are (a lot of) stocks that do not pay dividends and never will. There are a lot of stocks that were issued by companies that never made a profit. Both of those categories are traded with a value above zero, how do you explain that?
- glastra 9y ago
  Bitcoin has absolutely no utility as a currency. Look at the current mempool [0] to see why. People then switch to arguing that it's a great store of value. Given its volatility this makes no sense. [0]: https://jochen-hoenicke.de/queue/#24h https://jochen-hoenicke.de/queue/#24h
  - ravingraven 9y ago
    To clarify: Bitcoin is deeply flawed, and I agree with you that Bitcoin is probably worth less than many people speculate it is worth (but not zero). Cryptocurrencies in general have a lot of utility and solve real problems.
    - Cthulhu_ 9y ago
      And yet they introduce a lot of new problems too - problems that have been solved by traditional currencies a while ago. Problems like exchange security and protection to citizens. If my bank goes bankrupt for whatever reason, the government has an insurance for up to 100K for me. When mtgox went down, everyone lost their money.
      - Lunar_Lamp 9y ago
        I'm not sure I agree here. Those are definitely real issues that you've highlighted, but they're not because of crypto currency. There's no reason that a crypto-exchange cannot be as secure as a bank (or more), and that governments cannot insure crypto deposits up to some value. Those are purely problems for regulators/governments, which have been relatively slow to adapt legislation. The problems you highlight are real, and can be good reasons to favour traditional currencies, but they're also easy problems to solve - the thinking has already been done once for traditional currencies and the solutions for crypto are mostly identical.

cryptodogemoon 9y ago

Not with Bitcoin. Satoshi designed the supply to rapidly mint the majority of coins to the smallest group of users for the least amount of effort/capital/work input. It's designed to manipulate any user who joins the system after you. Satoshi could easily have chosen a linear curve to align with time, user growth, and increase in work input yet instead the manipulative log curve was chosen. Old users are now incentived to attempt to psychologically exploit new people by selling the asset for far more than the cost of production or acquisition.

celticninja 9y ago
You bring this up in every crypto thread. Do you have an alternative suggestion as to how it should work that could actually be implemented now in a new crypto?
- mikepurvis 9y ago
  Isn't it fundamentally a bootstrapping problem? A state can reasonably presume to sell a new currency in exchange for older (or foreign) currency— this is similar to issuing a bond or whatever else to raise money. And there's a guarantee of value in the sense that the state will accept the currency later on as your taxes. The Bitcoin network/ecosystem has nothing to offer in this sense— there's no plausible reason for it to be "raising" money by direct sales, and no one owes it taxes. So the initial tokens were distributed based on the fact that they were mined by early adopters before the difficulty got to be too great. There is indeed a basic unfairness in this, but it's not obvious to me how to resolve it for future projects of this kind.
- cryptodogemoon 9y ago
  A linear distribution curve that matches work/watt input. This modestly levels the playing field, although it simply allows existing capital to match the input/output. Satoshi style curves are both capital dependent and skewed disproportionately to the first to arrive within the tiny timeframe. Anti-sybil attacks would be immensely beneficial. Encouragement of honest economic activity. Scaling of bandwidth and fees. The ideal solution is a PoW that is computationally useful and desirable, BOINC, folding@home. Ethereum almost does this, but PoW algos as they exist now are anti-scale by design, where increasing computational power does not improve the network at all. The foreseeable longevity of PoW is ungodly waste, when a world wide distributed computing network has potential far far beyond brute force hash puzzles.