5 ms·

> The premise behind bitcoin-the-game is that the current wave of buyers must guess when (or if) a subsequent wave of buyers will emerge, this second next wave'

by aazaa 7y ago

> The premise behind bitcoin-the-game is that the current wave of buyers must guess when (or if) a subsequent wave of buyers will emerge, this second next wave's participation being contingent on when (or if) they believe a third wave of buyers to emerge. If they guess right, the early birds win at the expense of the late ones. ... This is a truly tired analysis. It goes by various names, including "greater fool theory." Notice how it applies to almost every asset being traded today? Stocks? Remember dividends? Not so much these days. Poster child is Amazon, but there's a slew of others that offer virtually nothing to investors other than price appreciation. Government bonds? Do do negative interest rates sound? You buy one of these because either you have to or you think others will have to. Real estate? Please. Take away price appreciation driven by easy money and few would bother "owning." What this piece ignores is the world's ever-encroaching governments and the ongoing assault on privacy - with money as the fulcrum.

JimboOmega 7y ago
At least with stock, even if they aren't paying a dividend in theory you own a portion of the earnings stream; it is instead reinvested in the company. But still a lot of companies do pay them (e.g. AAPL). If you owned all the shares of these companies you'd own something quite valuable that could return to you a lot of money, I think we all agree on that. (The ones with no dividend and you don't vote or control anything is worse).
XorNot 7y ago
Stocks represent actual ownership in the company, potentially voting control of the boards decisions. Government bonds are backed by the full force and trust of the government they represent, and repay the face value plus yield promised at the time they were bought. They represent the most reliable yield you can get. Real estate? You mean that thing you live in? This is all a bunch of a false equivocation with one goal: "please buy my Bitcoins and give me USD for them"
- askmike 7y ago
  > Stocks represent actual ownership in the company, potentially voting control of the boards decisions. A company is an abstract concept around a group of people, framed inside a legal entity. But yes, if you own many stocks you can sit at the table with some big boys. Most companies come with less risk than Bitcoin. But I rather buy Bitcoin than WeWork shares (assuming they list). > Government bonds are backed by the full force and trust of the government they represent, and repay the face value plus yield promised at the time they were bought. They represent the most reliable yield you can get. Until a government defaults. This doesn't happy every week, but ruling out that it doesn't is not the best investment strategy. --- I'm not denying Bitcoin is speculation, but so is everything else. Sure Bitcoin might be more speculative under your frame of reference. But it's not black and white.
  - eru 7y ago
    > But I rather buy Bitcoin than WeWork shares (assuming they list). Depends on the price. Thanks to limited liability, WeWork share can never be worth less than zero. And just liquidating their existing office supplis is probably worth at least a few thousand dollars. But, of course, you'd have to pay off creditors first. If WeWork lists and doesn't go under, and assuming even a weak version of the efficient market hypothesis, the price their shares trade on will be about 'right'. > Until a government defaults. This doesn't happy every week, but ruling out that it doesn't is not the best investment strategy. Agreed. Though in the developed world, inflation is usually the bigger worry. (Unless you buy inflation indexed bonds.)
    - IllogicalLogic 7y ago
      I find people's lack of knowledge about what makes Bitcoin valuable interesting. The reason Bitcoin is valuable is because the work required to create one is significantly harder than Fiat currencies and it is one of the only truly scarce assets in human history (hard cap). How much equipment do you need to counterfeit any fiat currency? Can you purchase the equipment for less than $10k? Yes, easy. How much equipment do you need to counterfeit Bitcoin? Can you purchase the equipment for less than $1 billion? No, not easy. You may think this is a trivial distinction but it has tremendous value knowing you have hard uncounterfeitable money with a hard cap. The US treasury spends hundreds of millions of dollars a year fighting fake bills, that's only 1 of the dozen or so problems bitcoin solves. The second is that all the verification and security is done by the most powerful supercomputer in human history. These things gives it its value. Garbage company stocks, you can throw those in the trash if the central banks aren't busy helping pump them. Hard money wins, soft money gets snuffed in the night.
- __MatrixMan__ 7y ago
  I'm not a big fan of Bitcoin as a long term solution, I consider it little more than a proof of concept. It took a long time for steam engines to outperform horses, and it may take just as long for a crypto-driven economy to emerge that outperforms our current one. But I think it will happen, and those cryptocurrencies--I'm very excited about those. Re stock: People are already working on blockchain voting mechanisms. Currently you need to own quite a sizeable chunk of a company's stock, and to go rather far out of your way, to actually influence the decision-making of a company you own stock in. Cryptos with on-chain governance, on the other hand, will remove most of that friction. Re. government: Sure, right now this type of decision making only applies to either protocol design decisions or how to edit transaction history in the event of a problem, but once the proposal-vote-consensus-action pipeline is figured out and trusted, I see no reason it won't start getting applied to the same problems that we keep governments around to solve. So yeah, government bonds are safe nowadays because government's don't have anything to compete with besides other slow inefficient governments, but if people think that a collection of community maintained consensus algorithms are more effective than their government--well I wouldn't want to be holding fiat bonds when that happens, because why pay taxes when you get more bang for your services-for-society buck elsewhere? As for real estate, just shooting from the hip I'd say that it's 10% real and 90% the game indicated in the article. In a world where large scale behavior of economies can be quickly altered by a vote and a parameter change, I certainly hope we can find a set of parameters that will eliminate the homeowners association and all of the waste associated with placing property resale value over utility. I'd much rather lose out on my "investment" in this house than continue to live in a world where my friends can't afford to live near me because of all the overpriced empty houses in the way--sucking up all the water for their perfectly manicured lawns that nobody touches while the poor kids down the road play on a field of gravel, broken glass, and thistle. I don't hold much Bitcoin, but I promise that I don't value it because I think I can later dupe somebody into buying it at a higher price. I value it because it's clumsily paving the way for a world with fewer parisitic middle-man institutions, and the further it gets before it falls over the sooner I'll get to live in that world. I guess that's called investing.
richk449 7y ago
Surely there is a difference between investments that have underlying value, but are speculated on, and investments which have no underlying value except that due to speculation.
- ftufek 7y ago
  Isn't the underlying value here mathematically provable scarcity ?
  - hanselot 7y ago
    Imagine a system existed whereby you could trade some time from your computer when it was idle for extra juice later. Some kind of credit if you will.
  - lalaland1125 7y ago
    There is no true scarcity. I can create a clone of Bitcoin in seconds just by cloning a github repository and changing one line.
    - nullc 7y ago
      Your clone of Bitcoin wouldn't be a 'clone' any more than a lead bar is a 'clone' of gold. You might call it bitcoin all you want, but no actualy bitcoin software would be fooled. (You might trick some people, but fraud has existed long before computers). It's a lot less expensive to reliably distinguish a fraudulent bitcoin from a fraudulent goal bar. So even if you hold the position that there is no perfect scarcity because fraud is possible-- the cost, difficulty, and success rate of that fraud matters greatly.
      - lalaland1125 7y ago
        My clone of bitcoin would have exactly the same properties as bitcoin. Your lead bar doesn't have any of the useful properties of gold (ductability, beauty, conductivity, etc).
gimmeThaBeet 7y ago
>Stocks? Remember dividends? Not so much these days. This one I have real issue with, ignores the much scorned buyback or any facet of capital investment. Your issue trades at a certain eps multiple, you take earned cash, buy shares with it. Sort of in a vacuum, it's the same business, why should the earnings change? But now you have less shares outstanding, so now your shares are in a more empirical sense worth more. If you want to consider it, the capital return can come from the company buying your shares. It can be harder with a company like amazon when they had a X00 eps, but it's still all about valuation. Amazon circa 2019 /= Amazon 1997. >Government bonds? Do do negative interest rates sound? You buy one of these because either you have to or you think others will have to. Yeah, some truth here. Alternatively, you do it because you think rates might go lower still, and their returns aren't highly correlated to equities. There's also a theory I'm partial to where in the pockets of the world that have a crazy high amount of savings, even past encouraging entities to find better returns, negative interest rates make no bones about making the the cost of savings clear. >Real estate? Please. Take away price appreciation driven by easy money and few would bother "owning." In a personal sense, real estate you own is rent you don't have to pay. In an external sense, real estate you own/operate is cash flows you can bring in. The elevated markets admittedly tend not to look so great in cash flow metrics.
eru 7y ago
> Stocks? Remember dividends? Not so much these days. We have plenty of stock buybacks. They are economically equivalent to dividends. Yes, Amazon hasn't returned much capital. Granted. > Real estate? Please. Take away price appreciation driven by easy money and few would bother "owning." Prices are pretty flat in eg most of Germany. People mostly buy to consume housing services, ie save on rent.

by aazaa 7y ago

JimboOmega 7y ago

At least with stock, even if they aren't paying a dividend in theory you own a portion of the earnings stream; it is instead reinvested in the company. But still a lot of companies do pay them (e.g. AAPL). If you owned all the shares of these companies you'd own something quite valuable that could return to you a lot of money, I think we all agree on that. (The ones with no dividend and you don't vote or control anything is worse).

XorNot 7y ago

Stocks represent actual ownership in the company, potentially voting control of the boards decisions. Government bonds are backed by the full force and trust of the government they represent, and repay the face value plus yield promised at the time they were bought. They represent the most reliable yield you can get. Real estate? You mean that thing you live in? This is all a bunch of a false equivocation with one goal: "please buy my Bitcoins and give me USD for them"

askmike 7y ago
> Stocks represent actual ownership in the company, potentially voting control of the boards decisions. A company is an abstract concept around a group of people, framed inside a legal entity. But yes, if you own many stocks you can sit at the table with some big boys. Most companies come with less risk than Bitcoin. But I rather buy Bitcoin than WeWork shares (assuming they list). > Government bonds are backed by the full force and trust of the government they represent, and repay the face value plus yield promised at the time they were bought. They represent the most reliable yield you can get. Until a government defaults. This doesn't happy every week, but ruling out that it doesn't is not the best investment strategy. --- I'm not denying Bitcoin is speculation, but so is everything else. Sure Bitcoin might be more speculative under your frame of reference. But it's not black and white.
- eru 7y ago
  > But I rather buy Bitcoin than WeWork shares (assuming they list). Depends on the price. Thanks to limited liability, WeWork share can never be worth less than zero. And just liquidating their existing office supplis is probably worth at least a few thousand dollars. But, of course, you'd have to pay off creditors first. If WeWork lists and doesn't go under, and assuming even a weak version of the efficient market hypothesis, the price their shares trade on will be about 'right'. > Until a government defaults. This doesn't happy every week, but ruling out that it doesn't is not the best investment strategy. Agreed. Though in the developed world, inflation is usually the bigger worry. (Unless you buy inflation indexed bonds.)
  - IllogicalLogic 7y ago
    I find people's lack of knowledge about what makes Bitcoin valuable interesting. The reason Bitcoin is valuable is because the work required to create one is significantly harder than Fiat currencies and it is one of the only truly scarce assets in human history (hard cap). How much equipment do you need to counterfeit any fiat currency? Can you purchase the equipment for less than $10k? Yes, easy. How much equipment do you need to counterfeit Bitcoin? Can you purchase the equipment for less than $1 billion? No, not easy. You may think this is a trivial distinction but it has tremendous value knowing you have hard uncounterfeitable money with a hard cap. The US treasury spends hundreds of millions of dollars a year fighting fake bills, that's only 1 of the dozen or so problems bitcoin solves. The second is that all the verification and security is done by the most powerful supercomputer in human history. These things gives it its value. Garbage company stocks, you can throw those in the trash if the central banks aren't busy helping pump them. Hard money wins, soft money gets snuffed in the night.
__MatrixMan__ 7y ago
I'm not a big fan of Bitcoin as a long term solution, I consider it little more than a proof of concept. It took a long time for steam engines to outperform horses, and it may take just as long for a crypto-driven economy to emerge that outperforms our current one. But I think it will happen, and those cryptocurrencies--I'm very excited about those. Re stock: People are already working on blockchain voting mechanisms. Currently you need to own quite a sizeable chunk of a company's stock, and to go rather far out of your way, to actually influence the decision-making of a company you own stock in. Cryptos with on-chain governance, on the other hand, will remove most of that friction. Re. government: Sure, right now this type of decision making only applies to either protocol design decisions or how to edit transaction history in the event of a problem, but once the proposal-vote-consensus-action pipeline is figured out and trusted, I see no reason it won't start getting applied to the same problems that we keep governments around to solve. So yeah, government bonds are safe nowadays because government's don't have anything to compete with besides other slow inefficient governments, but if people think that a collection of community maintained consensus algorithms are more effective than their government--well I wouldn't want to be holding fiat bonds when that happens, because why pay taxes when you get more bang for your services-for-society buck elsewhere? As for real estate, just shooting from the hip I'd say that it's 10% real and 90% the game indicated in the article. In a world where large scale behavior of economies can be quickly altered by a vote and a parameter change, I certainly hope we can find a set of parameters that will eliminate the homeowners association and all of the waste associated with placing property resale value over utility. I'd much rather lose out on my "investment" in this house than continue to live in a world where my friends can't afford to live near me because of all the overpriced empty houses in the way--sucking up all the water for their perfectly manicured lawns that nobody touches while the poor kids down the road play on a field of gravel, broken glass, and thistle. I don't hold much Bitcoin, but I promise that I don't value it because I think I can later dupe somebody into buying it at a higher price. I value it because it's clumsily paving the way for a world with fewer parisitic middle-man institutions, and the further it gets before it falls over the sooner I'll get to live in that world. I guess that's called investing.

richk449 7y ago

Surely there is a difference between investments that have underlying value, but are speculated on, and investments which have no underlying value except that due to speculation.

ftufek 7y ago
Isn't the underlying value here mathematically provable scarcity ?
- hanselot 7y ago
  Imagine a system existed whereby you could trade some time from your computer when it was idle for extra juice later. Some kind of credit if you will.
- lalaland1125 7y ago
  There is no true scarcity. I can create a clone of Bitcoin in seconds just by cloning a github repository and changing one line.
  - nullc 7y ago
    Your clone of Bitcoin wouldn't be a 'clone' any more than a lead bar is a 'clone' of gold. You might call it bitcoin all you want, but no actualy bitcoin software would be fooled. (You might trick some people, but fraud has existed long before computers). It's a lot less expensive to reliably distinguish a fraudulent bitcoin from a fraudulent goal bar. So even if you hold the position that there is no perfect scarcity because fraud is possible-- the cost, difficulty, and success rate of that fraud matters greatly.
    - lalaland1125 7y ago
      My clone of bitcoin would have exactly the same properties as bitcoin. Your lead bar doesn't have any of the useful properties of gold (ductability, beauty, conductivity, etc).

gimmeThaBeet 7y ago

>Stocks? Remember dividends? Not so much these days. This one I have real issue with, ignores the much scorned buyback or any facet of capital investment. Your issue trades at a certain eps multiple, you take earned cash, buy shares with it. Sort of in a vacuum, it's the same business, why should the earnings change? But now you have less shares outstanding, so now your shares are in a more empirical sense worth more. If you want to consider it, the capital return can come from the company buying your shares. It can be harder with a company like amazon when they had a X00 eps, but it's still all about valuation. Amazon circa 2019 /= Amazon 1997. >Government bonds? Do do negative interest rates sound? You buy one of these because either you have to or you think others will have to. Yeah, some truth here. Alternatively, you do it because you think rates might go lower still, and their returns aren't highly correlated to equities. There's also a theory I'm partial to where in the pockets of the world that have a crazy high amount of savings, even past encouraging entities to find better returns, negative interest rates make no bones about making the the cost of savings clear. >Real estate? Please. Take away price appreciation driven by easy money and few would bother "owning." In a personal sense, real estate you own is rent you don't have to pay. In an external sense, real estate you own/operate is cash flows you can bring in. The elevated markets admittedly tend not to look so great in cash flow metrics.

eru 7y ago

> Stocks? Remember dividends? Not so much these days. We have plenty of stock buybacks. They are economically equivalent to dividends. Yes, Amazon hasn't returned much capital. Granted. > Real estate? Please. Take away price appreciation driven by easy money and few would bother "owning." Prices are pretty flat in eg most of Germany. People mostly buy to consume housing services, ie save on rent.