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I read this book a couple of years ago and also reviewed it[0]. I consider it an excellent (if now out of date) roundup of the crypto industry. Like the author

I read this book a couple of years ago and also reviewed it[0]. I consider it an excellent (if now out of date) roundup of the crypto industry. Like the author, I think crypto is doomed to be outside of the main financial system unless they manage to shed the idiocy and outright scams that surround it. Unfortunately, the scams and idiotic ideals are really what draws people to the field so I don't see it happening anytime soon. Like I said in my blog post, I realize that some people have made money investing in crypto. Good luck to them but I think in general it is a negative sum game. [0] https://sheep.horse/2019/12/book_-_attack_of_the_50_foot_blockchain_by_david_g.html https://sheep.horse/2019/12/book_-_attack_of_the_50_foot_blo...

FabHK 5y ago
> I think in general it is a negative sum game. That's really the crucial point. If someone gets rich from a startup that is generally because they have created lots of value (exception: rent seeking, which might constitute a significant chunk of finance, ad tech). Bitcoin, you have many people putting in a lot of money, and some of that makes a few people very rich, and some of it goes to pay for electricity to solve Sudokus.
- AndrewStephens 5y ago
  As far as I can see there are only a few groups that actually make money consistently: * miners, they have actual capital outlay (equipment and electricity) but so long as the bitcoin they sell covers their expenses they are sitting pretty. * exchanges, running an exchange is cheap and people give you real cash. You do have to buy some bitcoin with that cash but not as much as you think, especially if you are less than honest (which you are because you run a bitcoin exchange). You can get away will telling people you have bought bitcoin on their behalf without actually doing it - allowing you to keep the cash. This is only a problem if they try to move the bitcoin off the exchange so be sure to provide incentives for them not to do that. Maybe offer them fake money instead. * people selling stuff for bitcoin. I am not sure this is still a big industry since the big marketplaces got shut down but I am sure you can sell your drugs, illegal porn, or unregulated weapons if you try hard enough. People do make money trading Bitcoin but the real market (once you remove Tether and such-like) seems very thin. My guess is most traders come out with a net loss.
  - FabHK 5y ago
    > * miners Agreed, though it obviously depends on the cost (price of ASICs and electricity), revenue (price of BTC), and competition (hash rate & difficulty), as well as the timeframe to set up an operation. Interesting problem. > * exchanges Big ones, yes. That seems to be pretty much an issue where your fixed costs are high, but marginal costs very low, so you really really want volume. So, hard to break in, and as a smaller exchange, you might well go bankrupt. And, the big exchanges charge enormous fees, from what I can see, much more than the good old "legacy tech" equity exchanges. LOL. > * people selling stuff for bitcoin. Hm, interesting. Yeah. Savoury guys. I'd add though * people that mined/bought very early, and now realise their gains.
    - AndrewStephens 5y ago
      > people that mined/bought very early, and now realise their gains. These guys certainly exist but there are probably less of them than you think. So much bitcoin has been lost or stolen over the years that I think many of them are out of the game. On top of that, they have to be careful. The actual market for cash<->bitcoin is very thin so cashing out is a long slow process. That said, there probably are a number of people who support themselves every month by selling enough bitcoin from their huge stash.
      - miracle2k 5y ago
        They aren't really that thin What kind of amounts do you think a single individual can sell without "having to be careful". Like what are we talking about here? Hundreds of millions of dollars?
  - simonw 5y ago
    * money launderers. Bitcoin is practically designed for this, and you can charge yourself clients a hefty fee to clean their money for them. * ransomware groups. Their business model relies almost completely on cryptocurrency.
user-the-name 5y ago
I mean, there is no need for opinion here, cryptocurrency trading is, mathematically and objectively speaking, a negative-sum game. There is no value created, so all money going out of the system comes from money other people put in. And miners steadily dilute the pool and cash out a fraction of what would otherwise be a zero-sum game. You can not, on average, come out ahead by trading bitcoins.

FabHK 5y ago

> I think in general it is a negative sum game. That's really the crucial point. If someone gets rich from a startup that is generally because they have created lots of value (exception: rent seeking, which might constitute a significant chunk of finance, ad tech). Bitcoin, you have many people putting in a lot of money, and some of that makes a few people very rich, and some of it goes to pay for electricity to solve Sudokus.

AndrewStephens 5y ago
As far as I can see there are only a few groups that actually make money consistently: * miners, they have actual capital outlay (equipment and electricity) but so long as the bitcoin they sell covers their expenses they are sitting pretty. * exchanges, running an exchange is cheap and people give you real cash. You do have to buy some bitcoin with that cash but not as much as you think, especially if you are less than honest (which you are because you run a bitcoin exchange). You can get away will telling people you have bought bitcoin on their behalf without actually doing it - allowing you to keep the cash. This is only a problem if they try to move the bitcoin off the exchange so be sure to provide incentives for them not to do that. Maybe offer them fake money instead. * people selling stuff for bitcoin. I am not sure this is still a big industry since the big marketplaces got shut down but I am sure you can sell your drugs, illegal porn, or unregulated weapons if you try hard enough. People do make money trading Bitcoin but the real market (once you remove Tether and such-like) seems very thin. My guess is most traders come out with a net loss.
- FabHK 5y ago
  > * miners Agreed, though it obviously depends on the cost (price of ASICs and electricity), revenue (price of BTC), and competition (hash rate & difficulty), as well as the timeframe to set up an operation. Interesting problem. > * exchanges Big ones, yes. That seems to be pretty much an issue where your fixed costs are high, but marginal costs very low, so you really really want volume. So, hard to break in, and as a smaller exchange, you might well go bankrupt. And, the big exchanges charge enormous fees, from what I can see, much more than the good old "legacy tech" equity exchanges. LOL. > * people selling stuff for bitcoin. Hm, interesting. Yeah. Savoury guys. I'd add though * people that mined/bought very early, and now realise their gains.
  - AndrewStephens 5y ago
    > people that mined/bought very early, and now realise their gains. These guys certainly exist but there are probably less of them than you think. So much bitcoin has been lost or stolen over the years that I think many of them are out of the game. On top of that, they have to be careful. The actual market for cash<->bitcoin is very thin so cashing out is a long slow process. That said, there probably are a number of people who support themselves every month by selling enough bitcoin from their huge stash.
    - miracle2k 5y ago
      They aren't really that thin What kind of amounts do you think a single individual can sell without "having to be careful". Like what are we talking about here? Hundreds of millions of dollars?
- simonw 5y ago
  * money launderers. Bitcoin is practically designed for this, and you can charge yourself clients a hefty fee to clean their money for them. * ransomware groups. Their business model relies almost completely on cryptocurrency.

user-the-name 5y ago

I mean, there is no need for opinion here, cryptocurrency trading is, mathematically and objectively speaking, a negative-sum game. There is no value created, so all money going out of the system comes from money other people put in. And miners steadily dilute the pool and cash out a fraction of what would otherwise be a zero-sum game. You can not, on average, come out ahead by trading bitcoins.