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Why Ethereum Will Win Store of Value
- kordlessagain 5y agoGold is a real thing. Crypto, no matter the stake, is a figment of our collective beliefs. Collective opinion isn’t something that can be split or analyzed, otherwise we’d already know everything.
- imgabe 5y agoGold is a real thing. The value of gold and willingness to trade it for food and shelter is a figment of our collective beliefs. We can assign that belief to any other thing we want, the US dollar, Bitcoin, whatever.
- cko 5y agoTo add to that, many things are tangible like real estate, but the notion of ownership is a figment of our collective beliefs as well.
- imgabe 5y agoWell, if you can physically enforce your ownership of something via force, that is a tangible expression of ownership. Generally, we have outsourced this to the state, though, as we seem to have a better society when ownership isn't determined solely by who's the best at violence.
- cko 5y agoTrue. Force can get pretty expensive and difficult to scale, so in practice I'm glad we outsourced it to the state (which is itself a construct). It's turtles (collective beliefs) all the way down. In my opinion if society breaks down enough, there are no secure assets besides tools of force and goodwill.
- tadfisher 5y agoI'm the most bearish person on crypto out of everyone I know, and even I can admit that gold only has value because of the value people assign to it. The value of gold beyond its niche uses in industry is a figment of our collective beliefs, in other words.
- tormeh 5y agoThis is why I'm holding gold (as a hedge against the stock market in these weird times). There is a buyer who will buy no matter the confidence in it. Gold is an important ingredient in, for example, electronics. Your computer and smartphone all have gold in them.
- travisjungroth 5y agoYour reasoning goes against the person you’re replying to. The vast majority of gold’s price is as an investment. If the investment demand went away, the price would plummet. Not 100% because of the industrial demand, but it would be a huge amount. If you want something where the value is backed by industrial use, literally any other metal would be a better choice.
- tormeh 5y agoTrue. It's similar to cryptocurrencies that way, but there is an underlying demand that I find comforting. Bitcoin etc. can be completely abandoned without consequence, but we need gold. Gold will probably always have some value. And as long as it is scarce, that value floor will probably allow its price to recover from a confidence crisis.
- arcticbull 5y agoIndeed, neither are productive assets, and I'm only interested in investing in and advocating for productive assets.
- devmunchies 5y agowhat about PAXG? it's a gold backed crypto. not much different in principle than a precious metals fund.
- kaczordon 5y agoBitcoin can act as a store of value if people want it to. A big reason people like gold is because there’s very little new gold mined every year, something like 1% of total supply. So it’s guaranteed to not inflate(versus the fed printing 30% of total USD supply this year), same thing with Bitcoin.
- raspasov 5y agoDo you think the value that we all attribute to gold is not a figment of our collective beliefs? If not, where do you think it derives its value from?
- spraveenitpro 5y agoNah.
- tormeh 5y ago> The basic premise is that money is simply technology that makes our wealth today available for consumption tomorrow. Thus the "best" money is the one that will give its holder the most purchasing power over time. This is absurd. A complete misunderstanding of what money is for. Money is a means of exchange. The "best" money is the one that's most widely accepted in places you want to spend it. It only needs to function as a store of value in the short term. Anything with less than 10% inflation per year should work.
- arcticbull 5y agoMoney only needs to be a few things. 1. Cheap, fast and easy to transact + broadly accepted. 2. Fungible. 3. Predictable. 4. Hold its value for exactly as long as it takes you to convert your earnings into either long-term value storage assets, or to spend on the necessities of life. Any longer is a non-goal. 5. [bonus] Flexible enough to respond to shocks, changes and externalities, offering mild, predictable inflation as measured against a basket of necessities. Every crypto fails 1, 3, 4 and 5 - and all the popular ones fail (2) also - as a public ledger revealing a coins history makes each transaction quantum unique. No idea why you got down-voted, the article is totally wrong.
- fastball 5y ago1. There are plenty of cryptos that this applies to right now. Cheap is not true for ETH atm, but it may soon be given the very real scaling solutions that are soon to come online. 2. Why does a means of exchange need to be fungible? Regardless, Monero and others are fungible. 3. Not sure what this means or why its required for money, but still seems like crypto can apply here. 4. Stablecoins exist, and I'm not even counting the shady AF ones like Tether. For example there is DAI, which is fully decentralized, runs on the Ethereum blockchain, has held stable very well (certainly well enough for the above use case) and which saw $2.6B trade volume in the last 24hr.
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- thefounder 5y agoWhy do people keep pushing blockchain tech as store as value? As far as ETH is concerned I see it more like the web, dns, IPFS. It's infrastructure software. It's not meant to be store of value. This frenzy looks more like the dot com bubble when everyone was thinking domain names will become the store of value of the future(i.e pets.com). I can see value in ICOs just like there is value in penny stocks or other secondary markets but that depends by the company that offers the shares/tokens. Of course if you know that someone will pump it and keep it up(i.e like banks do on IPOs) then there is speculative value as well but that's a different story. This being said I'm hopeful that some good tech will stick around just like the web tech did.
- fastball 5y agoI agree, which is why I stopped speculating on cryptos last year. That's not to say I don't think you can speculate and make money, because clearly you can. But the movements do not seem to behave very rationally, even by finance industry standards, which is saying something. That being said, I think the one difference is that ETH actually does have some intrinsic value assuming the Ethereum network is actually used to build useful things, which so far it seems like it is. As long as that is true, people will need ETH in order to pay gas fees. And if you need ETH to pay gas fees, presumably its value will scale somewhat proportionally to the real-world usefulness of the network.
- wmf 5y agoBitcoin doesn't have (useful) smart contracts and it's clearly not a currency so it's either a "store of value" or straight gambling. Ethereum has more leeway to define its identity.
- aeternum 5y agoCan blockchain exist without store of value? Put another way: Has any project proven that there is sufficient incentive for miners or stakers to secure a blockchain without significant value stored?
- rawtxapp 5y agoLet's look at it from the perspective of "I'm going to put my life savings into this thing" and hold on to it for at least 10+ years. Do I put it into Bitcoin which is simple, secure, battle tested, moves slowly but with broad consensus, has had a much fairer distribution, is not controlled by the whims of it's creator, etc? Or do I put it into eth that's been forked pretty easily after the dao hack, moves much faster, has significantly more complexity and critical bugs go unnoticed for months[1], that's in the middle of switching over to a significantly more complex, not battle-tested long enough PoS system with significant technical and also philosophical problems like embedding "rich gets richer" deep into the protocol, that's been pitched as a smart contract platform for years? You can still use the smart contracts using Bitcoin on top of eth, so it's not like you don't have access to them. The way I look at it, Bitcoin is my data (aka value) and eth is my computer (aka financial transaction platform), I switch computers every other year, but my data comes along with me. This is the question I've been pondering lately and it's pretty clear to me which one I'm choosing. That said, I have a stake in both and hope both succeed. 1: https://cryptonews.com/news/disclosed-ethereum-lived-with-a-major-threat-for-18-months-10368.htm https://cryptonews.com/news/disclosed-ethereum-lived-with-a-...
- arcticbull 5y agoGenerally one doesn't invest in currencies. Currencies aren't an asset class [1], and a currency isn't an asset. One uses currencies to buy assets. Conflating the two would be an economic catastrophe, as nobody spends an appreciating asset. That's why currencies and assets are forked the way they are. Proof is in the pudding: Pomp's Bitcoin Pizza cannot be paid for in Bitcoin - or any other crypto. [1] https://www.commonfund.org/blog/is-currency-an-asset-class#:~:text=Currencies%20are%20not%20an%20asset,trade%20compared%20to%20another%20currency.&text=There%20are%20few%20certainties%20in,point%2C%20you%20will%20lose%20money https://www.commonfund.org/blog/is-currency-an-asset-class#:....
- rawtxapp 5y agoWhat happens between the day of creation (when it's worth 0) and the day Bitcoin becomes global reserve currency (worth multiple trillions of dollars)? It acts as a highly appreciating asset with a great upside. Also, I agree with you, I wish IRS would treat it as currency so that we won't have to pay capital gains taxes on it.
- spenvo 5y agoJust wait a few months, when millions(?) who "own" ethereum on Robinhood realize not only do they not really own ETH, they actually "own" a security that tracks the price of Ethereum 1.x, and therefore can't upgrade to ethereum 2.0 or earn "staking" rewards. Proof of Stake is genuinely neat, but the transition to Ethereum 2.0 is going to be rocky because it will involve another hard fork that will create severe confusion for millions of Robinhood users. Furthermore, there are other cryptocurrencies, such as Tezos, which currently offer proof of stake, with staking rewards, etc. I don't get how Ethereum is better set up as a store of value at this point.
- germinalphrase 5y agoEth 1.x ownership doesn’t get rolled into Eth 2? (I’m firmly an outsider observer here)
- arcticbull 5y agoRemember the mantra, not your keys not your coins. Robinhood will own the ETH2 tokens on their behalf. But unless you own them, you can't stake them and earn rewards for doing so. I really doubt the RH crowd cares though, and RH could easily return the staking rewards to them as 'interest.'
- nsilvestri 5y agoSome exchanges do allow staking. That's actually the easiest way to stake for an individual who doesn't own 32 ETH or doesn't wants to set up their own node. But it's still not your coins.
- arcticbull 5y agoYep, agreed. Hopefully what I said didn't come across as any kind of criticism, I was hoping to explain the situation to the parent. RH could absolutely allow staking on behalf of coin owners, and frankly, it seems much easier than doing it yourself from what I've read and heard.
- Vadoff 5y agoSo Ethereum is better because it's deflationary, and proof of stake in which the rich get richer? Both of those are terrible. The reason why no one trusts Ethereum as a proper store of value is because it's not very decentralized, has a clear owner that can be pressured by governments to reverse transactions, the owner + early developers hold the vast majority of the Eth in existence, and there's been a clear precedence of the developers reversing transactions due to a bad smart contract.
- fastball 5y agoVast majority? Do you have a number? Because it seems like Buterin has 333,500 ETH, which is 0.3% of circulating supply. That's a lot mind you, but nowhere near a majority, much less a "vast majority".