9 ms·

I've always tried to tell people that ask me about crypto currencies that not only do they not have any intrinsic value, but the only positive value that they h

I've always tried to tell people that ask me about crypto currencies that not only do they not have any intrinsic value, but the only positive value that they have is entropy. I explained it like this over Christmas dinner, lets say I wanted to start a new commodity, for arguments sake lets say that this new commodity is based on matches. Matches have a value, you light them and they produce a certain amount of energy. You can use them to light candles, clean out that odor from the previous occupant of the toilet, you could even combine a match with a small sterling engine to create motive power. But my commodity isn't the matches, its the energy used as the match is burnt. In my novelty commodity I only trade in matches that have been used, its proof that the match performed work in that it burned a fractional number of BTUs. This proves that the matches are sound. Furthermore, I, as a processor of used match commodities, can charge a nominal transaction fee when people trade spent matches on my Matchchain(TM) platform. Also, while this is a commodity I will call it a currency regardless of the fact that it has no debt instruments, lacks liquidity and is completely unregulated and prone to theft. Would you care to invest? Now replace spent matches with spent compute.

hackernudes 8y ago
The "valuable" matches would have to do something statistically rare, like make a pattern of Jesus's face or something. And somehow be resistant to counterfeit matches. Then your analogy almost makes sense.
- TazeTSchnitzel 8y ago
  Every match head burnt is required to be slightly larger in diameter than the first, so eventually you're burning massive purpose-built “matches”.
- stillbourne 8y ago
  Do crypto coins make patterns of Jesus's face? Man there is something I would never have guessed. Also is counterfeit money really that big of a problem that its debasing the value of the dollar enough that we have to abandon all notions of fiat currency and replace it with an entropic commodity that burns energy to no other end? I mean I get, that the "valuable matches" are the ones that "make a coin" of whatever the jargon is but the problem is to make a "coin" takes 215 kWh to create, lets put that back into match terms, assuming one matchstick has one BTU and we convert BTU to kWh that comes to about 733610 matches at a conversion rate of 0.000293071 kWh per BTU that comes to about 2445 boxes of 300 count matches. Amazon sells a 3 pack of 300 count matches for 6.75 which comes out to about $5501.25 for 733610 count of matches. Now be aware that I'm pulling these number out of my ass, butt every match I burn has a 1 in 733610 chance of being a "Jesus Match" that means that I can burn more than that and still not end up with a match that is a Jesus Match because its a statistical argument much like the lottery. In the end what do I have to show for all of this? A huge fucking pile of used matches, and a real sense that maybe just maybe the Emperor's New Currency has value.
  - hackernudes 8y ago
    What you have to show at the end of the day is a digital currency that has no central authority and yet still prevents double spending. The cycles are not wasted - they secure a digital currency. Banks and governments use immense resources to secure fiat currency.
    - stillbourne 8y ago
      >The cycles are not wasted - they secure a digital currency. But why though? Is the USD that insecure? Is fraud so prevalent that its debasing the value of currency? Do we literally need to spend 70TWh per year, and that's just in its current state as a semi novelty currency/commodity, to secure the concept of money? Can you imagine how much it would cost to run bitcoin if it was the primary reserve currency of the world?
      - vitaliksghost 8y ago
        Flippant asshat, you are.
        stillbourne 8y ago
        It's ok, if you believe hard enough and know that your heart is pure then the Emperor's New Currency will have value. I'm just the guy asking why.
        erulabs 8y ago
        Your comments violate rule #1 of Hacker News comments. > Be civil. Don't say things you wouldn't say face-to-face. Don't be snarky. Comments should get more civil and substantive, not less, as a topic gets more divisive. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html We're discussing ideas here, there is no reason presuppose others ideas or behave snarkily.
        8y ago
just_one_time_ 8y ago
Wow, you are stupid.
erulabs 8y ago
Nothing in the _world_ has intrinsic value. Obviously, this an opinion, but I do believe it has strong epistemological backing. An easy overview of the opinion by wired: https://www.wired.com/story/bitcoin-has-no-intrinsic-value-neither-does-a-dollar1-bill/ https://www.wired.com/story/bitcoin-has-no-intrinsic-value-n..., a 1970s era discussion by a historian economist: https://fee.org/articles/the-fallacy-of-intrinsic-value/ https://fee.org/articles/the-fallacy-of-intrinsic-value/, and a deep dive the theory itself: https://mises.org/library/introduction-value-theory https://mises.org/library/introduction-value-theory Now i'm not expecting nor wanting to get into a debate about the theory of value. I do not expect to be able to win, nor do I want to, but I do hope some doubt is cast into the proposition: > Matches have a value, you light them and they produce a certain amount of energy Matches have a _utility_, not necessarily a value. Additionally, compute is _also_ just "burning resources", only its electricity instead of potassium chlorate. Arguably a more fungible form. > regardless of the fact that it has no debt instruments, lacks liquidity and is completely unregulated and prone to theft. Only one of the four accusations stands up to any critical thought - which is that it is "completely unregulated". If that is the core of your argument against distributed, trustless currency, then that argument applies equally to all pre Federal Reserve transactions the world over, and I'm not sure what the implied problem is. The best quote from the first and most approachable of the links above: > All new mediums of exchange spawn skepticism, and should. For much of the 19th century, paper money was held in ill repute because it seemed so ephemeral and detached from value that could be easily recognized: land, gold, size of armies.
- stillbourne 8y ago
  Labor is the principal value of a currency. I'm guessing you are a libertarian. Maybe you should learn about how commerce, financial instruments, and debt work before saying money has no intrinsic value. Otherwise, if money has no intrinsic value then why work for it? Maybe we should go be communists. As Labor is the principal value of currency, so is debt the obligations of its members. When you get a loan you are not just getting money for interest over time, a group of loans can be packaged into bonds and the bonds can be sold by the lender as a lien against the debt. You get money, the bank gets interest and the bond holders get a percentage. Tell me, where can I get a loan for bitcoin from a FDIC lender? Someone I know who will be honest and not Gox me. Is spent compute the same as labor? Can a thing that computes a thing that stores a thing that hashes a thing that shows that a transaction for a thing happens have a value greater than the things I do for my career? Because to me blockchain is a waste of energy and Energy used for Compute, aka Entropy, has no value.
DJBunnies 8y ago
Send matches securely to anybody in the world, you say?
- stillbourne 8y ago
  Yes, sir its part of my Matchchain Bullshit Tech. I can't say that you won't get Goxed though.
- Retric 8y ago
  Look at how may people and companies lost crypto currency of one form or another. That suggests security is actually a major unsolved issues with crypto.
  - DJBunnies 8y ago
    It's not the fault of crypto currency that people fall for phishing, have insecure infrastructure, or shitty backup strategies.
    - plywoodtrees 8y ago
      A technical system which in practice cannot be reliably operated securely, and which is prone to no-recourse losses, is worse than alternatives.
wallacoloo 8y ago
This is a creative metaphor, but like most metaphors, not all of the novel properties of the original system were preserved in the metaphor. If you want to improve the metaphor find a way to make it so that as a holder of matches I can have very high confidence that there is an upper limit of N matches that can exist at any given time extending far into the future. Also add some way for me to transfer my matches to another match holder in ten minutes (or an hour, or whatever reasonable interval) regardless of the physical distance between us.
- stillbourne 8y ago
  Yes, lets create a scarcity of all of our burned matches! If my calculations are correct, at 21m bitcoin would be the equivalent of 15,405,810,000,000 used matches. That's a great idea. Sadly, you'll just have to wait 24h for my antique wire transfer.
  - sparkie 8y ago
    The key distinction between a burned match and a some bitcoin is that you can't forge the latter. Anyone can forge a match, and it would be extremely difficult to create an "authentic" match, which the receiver of in a transaction could verify to be such. Anything could technically be used as currency. Historically people have always used something that is difficult to forge, because forgery results in inflation, meaning the currency which they hold loses its purchasing power over short times. It ends up not worth the labor they put in to earn it. If that were known at the time they done the labor, they would've asked for payment in something else. Bitcoin is the best currency that has existed, because it is the first which is absolutely infeasible to forge, and it is simultaneously easy to verify its authenticity.
    - stillbourne 8y ago
      >Anything could technically be used as currency. Historically people have always used something that is difficult to forge. It's estimated that $70 million dollars in counterfeit money is in circulation in the US. At an estimate of $0.12 per kWh of electrical use Bitcoin uses approximately 70 tWh of power a year. Lets see that comes out to about $120m. At what point is the cure worse than the disease? Again this is just for Bitcoin in its current state as a semi-novelty currency/commodity. How much would it cost to operate the grid for bitcoin if it was the worlds primary reserve currency?
erikpukinskis 8y ago
Cryptocurrencies are games and games have intrinsic value. AirBnB is a game, and if you implemented it as a cryptocurrency it would have value. There’s nothing particularly special about AirBnB in terms of software. It’s barely more complex than Bitcoin. But implementing games so that cheating is prohibitively expensive is very hard. That’s why we only have pretty simple games so far, like “ledger” and “compute”. But we will some day have the entire set of Games Whose Cheats Can, With Some Effort, Be Made Prohibitively Expensive available to us as cryptocurrencies. Tokens in those systems will all have intrinsic value proportionate to the value those games have in society.
russdpale 8y ago
The difference, however, is that the compute is actually doing something: trustlessly verifying the ledger (or chain). Whereas in your description to your family members, your burning the match does nothing of any value, for anyone, for any reason. I find many other issues with your framing of bitcoin, but the above is the most glaring, to me.
- man-and-laptop 8y ago
  Exactly. The value of Bitcoin comes from the fact that it's something scarce and un-counterfeit-able, just as money should be, while also being "de-centralised" and not tied to a government or corporation. The Proof of Work (the match burning) is just the means behind how that's achieved. It is absolutely not how Bitcoin derives its value; that's actually something we'd prefer it didn't need to do, but unfortunately it has to.

hackernudes 8y ago

The "valuable" matches would have to do something statistically rare, like make a pattern of Jesus's face or something. And somehow be resistant to counterfeit matches. Then your analogy almost makes sense.

TazeTSchnitzel 8y ago
Every match head burnt is required to be slightly larger in diameter than the first, so eventually you're burning massive purpose-built “matches”.
stillbourne 8y ago
Do crypto coins make patterns of Jesus's face? Man there is something I would never have guessed. Also is counterfeit money really that big of a problem that its debasing the value of the dollar enough that we have to abandon all notions of fiat currency and replace it with an entropic commodity that burns energy to no other end? I mean I get, that the "valuable matches" are the ones that "make a coin" of whatever the jargon is but the problem is to make a "coin" takes 215 kWh to create, lets put that back into match terms, assuming one matchstick has one BTU and we convert BTU to kWh that comes to about 733610 matches at a conversion rate of 0.000293071 kWh per BTU that comes to about 2445 boxes of 300 count matches. Amazon sells a 3 pack of 300 count matches for 6.75 which comes out to about $5501.25 for 733610 count of matches. Now be aware that I'm pulling these number out of my ass, butt every match I burn has a 1 in 733610 chance of being a "Jesus Match" that means that I can burn more than that and still not end up with a match that is a Jesus Match because its a statistical argument much like the lottery. In the end what do I have to show for all of this? A huge fucking pile of used matches, and a real sense that maybe just maybe the Emperor's New Currency has value.
- hackernudes 8y ago
  What you have to show at the end of the day is a digital currency that has no central authority and yet still prevents double spending. The cycles are not wasted - they secure a digital currency. Banks and governments use immense resources to secure fiat currency.
  - stillbourne 8y ago
    >The cycles are not wasted - they secure a digital currency. But why though? Is the USD that insecure? Is fraud so prevalent that its debasing the value of currency? Do we literally need to spend 70TWh per year, and that's just in its current state as a semi novelty currency/commodity, to secure the concept of money? Can you imagine how much it would cost to run bitcoin if it was the primary reserve currency of the world?
    - vitaliksghost 8y ago
      Flippant asshat, you are.
      - stillbourne 8y ago
        It's ok, if you believe hard enough and know that your heart is pure then the Emperor's New Currency will have value. I'm just the guy asking why.
        erulabs 8y ago
        Your comments violate rule #1 of Hacker News comments. > Be civil. Don't say things you wouldn't say face-to-face. Don't be snarky. Comments should get more civil and substantive, not less, as a topic gets more divisive. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html We're discussing ideas here, there is no reason presuppose others ideas or behave snarkily.
        8y ago

just_one_time_ 8y ago

Wow, you are stupid.

erulabs 8y ago

Nothing in the _world_ has intrinsic value. Obviously, this an opinion, but I do believe it has strong epistemological backing. An easy overview of the opinion by wired: https://www.wired.com/story/bitcoin-has-no-intrinsic-value-neither-does-a-dollar1-bill/ https://www.wired.com/story/bitcoin-has-no-intrinsic-value-n..., a 1970s era discussion by a historian economist: https://fee.org/articles/the-fallacy-of-intrinsic-value/ https://fee.org/articles/the-fallacy-of-intrinsic-value/, and a deep dive the theory itself: https://mises.org/library/introduction-value-theory https://mises.org/library/introduction-value-theory Now i'm not expecting nor wanting to get into a debate about the theory of value. I do not expect to be able to win, nor do I want to, but I do hope some doubt is cast into the proposition: > Matches have a value, you light them and they produce a certain amount of energy Matches have a _utility_, not necessarily a value. Additionally, compute is _also_ just "burning resources", only its electricity instead of potassium chlorate. Arguably a more fungible form. > regardless of the fact that it has no debt instruments, lacks liquidity and is completely unregulated and prone to theft. Only one of the four accusations stands up to any critical thought - which is that it is "completely unregulated". If that is the core of your argument against distributed, trustless currency, then that argument applies equally to all pre Federal Reserve transactions the world over, and I'm not sure what the implied problem is. The best quote from the first and most approachable of the links above: > All new mediums of exchange spawn skepticism, and should. For much of the 19th century, paper money was held in ill repute because it seemed so ephemeral and detached from value that could be easily recognized: land, gold, size of armies.

stillbourne 8y ago
Labor is the principal value of a currency. I'm guessing you are a libertarian. Maybe you should learn about how commerce, financial instruments, and debt work before saying money has no intrinsic value. Otherwise, if money has no intrinsic value then why work for it? Maybe we should go be communists. As Labor is the principal value of currency, so is debt the obligations of its members. When you get a loan you are not just getting money for interest over time, a group of loans can be packaged into bonds and the bonds can be sold by the lender as a lien against the debt. You get money, the bank gets interest and the bond holders get a percentage. Tell me, where can I get a loan for bitcoin from a FDIC lender? Someone I know who will be honest and not Gox me. Is spent compute the same as labor? Can a thing that computes a thing that stores a thing that hashes a thing that shows that a transaction for a thing happens have a value greater than the things I do for my career? Because to me blockchain is a waste of energy and Energy used for Compute, aka Entropy, has no value.

DJBunnies 8y ago

Send matches securely to anybody in the world, you say?

stillbourne 8y ago
Yes, sir its part of my Matchchain Bullshit Tech. I can't say that you won't get Goxed though.
Retric 8y ago
Look at how may people and companies lost crypto currency of one form or another. That suggests security is actually a major unsolved issues with crypto.
- DJBunnies 8y ago
  It's not the fault of crypto currency that people fall for phishing, have insecure infrastructure, or shitty backup strategies.
  - plywoodtrees 8y ago
    A technical system which in practice cannot be reliably operated securely, and which is prone to no-recourse losses, is worse than alternatives.

wallacoloo 8y ago

This is a creative metaphor, but like most metaphors, not all of the novel properties of the original system were preserved in the metaphor. If you want to improve the metaphor find a way to make it so that as a holder of matches I can have very high confidence that there is an upper limit of N matches that can exist at any given time extending far into the future. Also add some way for me to transfer my matches to another match holder in ten minutes (or an hour, or whatever reasonable interval) regardless of the physical distance between us.

stillbourne 8y ago
Yes, lets create a scarcity of all of our burned matches! If my calculations are correct, at 21m bitcoin would be the equivalent of 15,405,810,000,000 used matches. That's a great idea. Sadly, you'll just have to wait 24h for my antique wire transfer.
- sparkie 8y ago
  The key distinction between a burned match and a some bitcoin is that you can't forge the latter. Anyone can forge a match, and it would be extremely difficult to create an "authentic" match, which the receiver of in a transaction could verify to be such. Anything could technically be used as currency. Historically people have always used something that is difficult to forge, because forgery results in inflation, meaning the currency which they hold loses its purchasing power over short times. It ends up not worth the labor they put in to earn it. If that were known at the time they done the labor, they would've asked for payment in something else. Bitcoin is the best currency that has existed, because it is the first which is absolutely infeasible to forge, and it is simultaneously easy to verify its authenticity.
  - stillbourne 8y ago
    >Anything could technically be used as currency. Historically people have always used something that is difficult to forge. It's estimated that $70 million dollars in counterfeit money is in circulation in the US. At an estimate of $0.12 per kWh of electrical use Bitcoin uses approximately 70 tWh of power a year. Lets see that comes out to about $120m. At what point is the cure worse than the disease? Again this is just for Bitcoin in its current state as a semi-novelty currency/commodity. How much would it cost to operate the grid for bitcoin if it was the worlds primary reserve currency?

erikpukinskis 8y ago

Cryptocurrencies are games and games have intrinsic value. AirBnB is a game, and if you implemented it as a cryptocurrency it would have value. There’s nothing particularly special about AirBnB in terms of software. It’s barely more complex than Bitcoin. But implementing games so that cheating is prohibitively expensive is very hard. That’s why we only have pretty simple games so far, like “ledger” and “compute”. But we will some day have the entire set of Games Whose Cheats Can, With Some Effort, Be Made Prohibitively Expensive available to us as cryptocurrencies. Tokens in those systems will all have intrinsic value proportionate to the value those games have in society.

russdpale 8y ago

The difference, however, is that the compute is actually doing something: trustlessly verifying the ledger (or chain). Whereas in your description to your family members, your burning the match does nothing of any value, for anyone, for any reason. I find many other issues with your framing of bitcoin, but the above is the most glaring, to me.

man-and-laptop 8y ago
Exactly. The value of Bitcoin comes from the fact that it's something scarce and un-counterfeit-able, just as money should be, while also being "de-centralised" and not tied to a government or corporation. The Proof of Work (the match burning) is just the means behind how that's achieved. It is absolutely not how Bitcoin derives its value; that's actually something we'd prefer it didn't need to do, but unfortunately it has to.