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well said. You know what makes me really sad? This money ($Billions+) is being stored in cryptocurrencies instead of being put to good use, such as investing in

well said. You know what makes me really sad? This money ($Billions+) is being stored in cryptocurrencies instead of being put to good use, such as investing in companies that actually build things... Am I seeing it wrong? Tell me! Note: I am not a big fan of the stock market either (it's pretty much a fake investment), we need investing 2.0, we have the tools, we just need the "Elon Musk" of finance Note #2: I don't do what i'm preaching. I do own Ethereum because i'm hoping the smart contract layer might actually become useful someday (right now there are about 1000 DApps and they aren't that useful just yet IMHO)

JonFish85 9y ago
Just to play devil's advocate on this, the money in the stock market (i.e. any stock transaction outside of a public offering) is generally not being invested in companies that actually build things, it's getting stored.
- yohann305 9y ago
  i totally agree, i am not a big fan of the stock market, we need investing 2.0, we have the tools, we just need the "Elon Musk" of finance
- criddell 9y ago
  It's stored, but isn't it also being loaned out as well? Isn't that part of how the money supply grows - fractional reserve?
  - JonFish85 9y ago
    "isn't it also being loaned out as well" Hm? In the stock market, you pay a current stockholder for their share(s). The company sees no money from the transaction. It sounds like what you're thinking of is banking, which is something different.
    - vasilipupkin 9y ago
      incorrect. the company sees money from the transaction in several indirect ways. the existence of the market is what enabled the company to go public in the first place.
      - hndamien 9y ago
        They also see money from the increased valuation of the stock they are still holding. This can be used to be borrowed against or sold.
    - criddell 9y ago
      I was mostly thinking about brokers. If I buy stock and hold it in my brokerage account, doesn't the brokerage use that money and stock to generate even more wealth? For example, they might loan my stock to somebody that wants to short that company.
- blibble 9y ago
  not really true, your broker will often lend out your shares for a fee or use them as collateral for their own business
to3m 9y ago
The people that got the money probably didn't put it under their bed.
gonvaled 9y ago
What do you mean "stored"? The fiat used to buy bitcoins went to sellers, so they have it. The current "valuation" suffers from the same issues as the valuation of any asset.
- PeterisP 9y ago
  A significant part (literal billions of dollars) of fiat used to buy bitcoins went to miners direct electricity expenses, and those extreme amounts of resources were permanently spent, possibly wasted. It's not a zero-sum game, as sustaining the current system costs a lot. A quick, rough calculation - if ~30 TWh were spent on mining Bitcoin, and the marginal rate of death for electricity generation is at least 100 per TWh (https://www.forbes.com/sites/jamesconca/2012/06/10/energys-deathprint-a-price-always-paid https://www.forbes.com/sites/jamesconca/2012/06/10/energys-d... or https://www.nextbigfuture.com/2016/06/update-of-death-per-terawatt-hour-by.html https://www.nextbigfuture.com/2016/06/update-of-death-per-te...), this means that we have sacrificed the lives of at least 3000 people to make this happen. Are the benefits worth this cost?
  - chrisdbaldwin 9y ago
    Are the costs of the current paradigm any different?
    - PeterisP 9y ago
      Yes, any other international electronic payment system (Fedwire, SEPA, SWIFT, Visa, Mastercard, etc) requires much, much less (Thousandfold? more? It's tricky to estimate) energy resources per transaction. Bitcoin consumes more electricity than whole small nations, and in each of those small nations that electricity is sufficient to run a financial industry that processes much more transactions than Bitcoin, and leaves enough energy for other industries as well. Bitcoin proof-of-work principle means that the power wasted (intentionally, to prove that work has been done) on a single transaction is absolutely ridiculous. Clearing transactions, the (comparably small) part of a financial transfer that Bitcoin does, is comparably simple and easy and constitutes a minority of both the effort and cost of financial transactions. Things like dispute resolution, fraud control, client-side tools, customer service and acquisition, etc take more than that, but that's not included in the standard Bitcoin transaction fee / miner's expense.
criddell 9y ago
Do you have the same complaint about gold? To me, they seem very similar from a gambling perspective.
- yohann305 9y ago
  yes, i'd rather buy a farm and no gold (someday i'll buy a urban farm)
- madeofpalk 9y ago
  Is gold used as an investment/speculation vehicle? My impression was that generally was quite ill advised to 'invest' into gold.
- j0rd 9y ago
  Gold has been used as a store of value for countries which do not trust their fiat. It's also used to speculate. It's also used in industry. It's actually pretty easy to turn gold into fiat and vice versa outside of north America. It's also fairly easy to do it in North America as well. The spread between buy/sell is also quite low.
binaryorganic 9y ago
There's beginning to be a lot of movement in the alt-coin space where people are trying to DO things with the blockchain, far beyond just a store of value. There's not a lot of love here on HN for a lot of that effort, but it's not terribly controversial to say that there are a large number of dev teams working on products in a multitude of fields that are putting the blockchain to work. The controversy seems to be whether blockchain tech is a sensible solution to some of these problems (that is, people ARE actually building lots of things, but the verdict is contentiously out on how sensible/lasting those things will be).
- balefrost 9y ago
  I guess it depends on how you define "blockchain". If it's a system that involves distributed, untrusted participants and the need for proof-of-work, then I too wonder how useful that ends up being in the general case.
  - erikpukinskis 9y ago
    The general case is: federation of individuals can compete with single large corporation because cryptocontracts provide equivalent operational stability to what a single controlling entity can provide. When corporate bylaws are written in code, you can replace a single legal entity with thousands of former employees operating as sole proprietorships.
    - balefrost 9y ago
      Sure, but you don't need proof-of-work for that. All you need is for every participant to ratify the bylaws-as-code, which you can do with simple public/private signing. The only reason that proof-of-work is needed for a currency is that the ledger is changing constantly. For something that changes infrequently, the double-spend problem (or the contractual equivalent) isn't nearly as big of a deal. Like I said, it depends on how you define "the blockchain". Many problems don't involve an open set of untrusted peers, and many problems don't require proof-of-work. So if you include those in the definition, then the blockchain isn't appropriate for a lot of those problems. And if you exclude those aspects, then what do you have left? A chain of cryptographically signed nodes that each point to their predecessor? That's been an underpinning of x.509 for, what, over 20 years? It's nothing new.
mistercow 9y ago
I don't think you're seeing it entirely wrong, but there are other effects this is having other than locking away money. One positive effect this is possibly having (I haven't seen a direct analysis of this) is to boost GPU R&D. Right now it sucks for people who want to use GPUs for other things, because it's causing shortages, but that's presumably not a permanent state of affairs. And better GPUs will be good for a lot of other fields, particularly AI.
makomk 9y ago
Part of the reason Bitcoin's value exploded the way it did is probably because stock market valuations have been looking rather frothy lately; there's a lot more money out there looking for good uses to which it can be put than there is actual investments.

JonFish85 9y ago

Just to play devil's advocate on this, the money in the stock market (i.e. any stock transaction outside of a public offering) is generally not being invested in companies that actually build things, it's getting stored.

yohann305 9y ago
i totally agree, i am not a big fan of the stock market, we need investing 2.0, we have the tools, we just need the "Elon Musk" of finance
criddell 9y ago
It's stored, but isn't it also being loaned out as well? Isn't that part of how the money supply grows - fractional reserve?
- JonFish85 9y ago
  "isn't it also being loaned out as well" Hm? In the stock market, you pay a current stockholder for their share(s). The company sees no money from the transaction. It sounds like what you're thinking of is banking, which is something different.
  - vasilipupkin 9y ago
    incorrect. the company sees money from the transaction in several indirect ways. the existence of the market is what enabled the company to go public in the first place.
    - hndamien 9y ago
      They also see money from the increased valuation of the stock they are still holding. This can be used to be borrowed against or sold.
  - criddell 9y ago
    I was mostly thinking about brokers. If I buy stock and hold it in my brokerage account, doesn't the brokerage use that money and stock to generate even more wealth? For example, they might loan my stock to somebody that wants to short that company.
blibble 9y ago
not really true, your broker will often lend out your shares for a fee or use them as collateral for their own business

to3m 9y ago

The people that got the money probably didn't put it under their bed.

gonvaled 9y ago

What do you mean "stored"? The fiat used to buy bitcoins went to sellers, so they have it. The current "valuation" suffers from the same issues as the valuation of any asset.

PeterisP 9y ago
A significant part (literal billions of dollars) of fiat used to buy bitcoins went to miners direct electricity expenses, and those extreme amounts of resources were permanently spent, possibly wasted. It's not a zero-sum game, as sustaining the current system costs a lot. A quick, rough calculation - if ~30 TWh were spent on mining Bitcoin, and the marginal rate of death for electricity generation is at least 100 per TWh (https://www.forbes.com/sites/jamesconca/2012/06/10/energys-deathprint-a-price-always-paid https://www.forbes.com/sites/jamesconca/2012/06/10/energys-d... or https://www.nextbigfuture.com/2016/06/update-of-death-per-terawatt-hour-by.html https://www.nextbigfuture.com/2016/06/update-of-death-per-te...), this means that we have sacrificed the lives of at least 3000 people to make this happen. Are the benefits worth this cost?
- chrisdbaldwin 9y ago
  Are the costs of the current paradigm any different?
  - PeterisP 9y ago
    Yes, any other international electronic payment system (Fedwire, SEPA, SWIFT, Visa, Mastercard, etc) requires much, much less (Thousandfold? more? It's tricky to estimate) energy resources per transaction. Bitcoin consumes more electricity than whole small nations, and in each of those small nations that electricity is sufficient to run a financial industry that processes much more transactions than Bitcoin, and leaves enough energy for other industries as well. Bitcoin proof-of-work principle means that the power wasted (intentionally, to prove that work has been done) on a single transaction is absolutely ridiculous. Clearing transactions, the (comparably small) part of a financial transfer that Bitcoin does, is comparably simple and easy and constitutes a minority of both the effort and cost of financial transactions. Things like dispute resolution, fraud control, client-side tools, customer service and acquisition, etc take more than that, but that's not included in the standard Bitcoin transaction fee / miner's expense.

criddell 9y ago

Do you have the same complaint about gold? To me, they seem very similar from a gambling perspective.

yohann305 9y ago
yes, i'd rather buy a farm and no gold (someday i'll buy a urban farm)
madeofpalk 9y ago
Is gold used as an investment/speculation vehicle? My impression was that generally was quite ill advised to 'invest' into gold.
j0rd 9y ago
Gold has been used as a store of value for countries which do not trust their fiat. It's also used to speculate. It's also used in industry. It's actually pretty easy to turn gold into fiat and vice versa outside of north America. It's also fairly easy to do it in North America as well. The spread between buy/sell is also quite low.

binaryorganic 9y ago

There's beginning to be a lot of movement in the alt-coin space where people are trying to DO things with the blockchain, far beyond just a store of value. There's not a lot of love here on HN for a lot of that effort, but it's not terribly controversial to say that there are a large number of dev teams working on products in a multitude of fields that are putting the blockchain to work. The controversy seems to be whether blockchain tech is a sensible solution to some of these problems (that is, people ARE actually building lots of things, but the verdict is contentiously out on how sensible/lasting those things will be).

balefrost 9y ago
I guess it depends on how you define "blockchain". If it's a system that involves distributed, untrusted participants and the need for proof-of-work, then I too wonder how useful that ends up being in the general case.
- erikpukinskis 9y ago
  The general case is: federation of individuals can compete with single large corporation because cryptocontracts provide equivalent operational stability to what a single controlling entity can provide. When corporate bylaws are written in code, you can replace a single legal entity with thousands of former employees operating as sole proprietorships.
  - balefrost 9y ago
    Sure, but you don't need proof-of-work for that. All you need is for every participant to ratify the bylaws-as-code, which you can do with simple public/private signing. The only reason that proof-of-work is needed for a currency is that the ledger is changing constantly. For something that changes infrequently, the double-spend problem (or the contractual equivalent) isn't nearly as big of a deal. Like I said, it depends on how you define "the blockchain". Many problems don't involve an open set of untrusted peers, and many problems don't require proof-of-work. So if you include those in the definition, then the blockchain isn't appropriate for a lot of those problems. And if you exclude those aspects, then what do you have left? A chain of cryptographically signed nodes that each point to their predecessor? That's been an underpinning of x.509 for, what, over 20 years? It's nothing new.

mistercow 9y ago

I don't think you're seeing it entirely wrong, but there are other effects this is having other than locking away money. One positive effect this is possibly having (I haven't seen a direct analysis of this) is to boost GPU R&D. Right now it sucks for people who want to use GPUs for other things, because it's causing shortages, but that's presumably not a permanent state of affairs. And better GPUs will be good for a lot of other fields, particularly AI.

makomk 9y ago

Part of the reason Bitcoin's value exploded the way it did is probably because stock market valuations have been looking rather frothy lately; there's a lot more money out there looking for good uses to which it can be put than there is actual investments.