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Not necessarily. I work for a bank. Applying your analysis, one could argue that banks offer zero intrinsic value. After all, all they allow you to do is to mo
by mcherm 5y ago
Not necessarily.
I work for a bank. Applying your analysis, one could argue that banks offer zero intrinsic value. After all, all they allow you to do is to move money around back and forth between different people.
But, as it turns out, moving money back and forth between different people is a very valuable service. Let me be clear: there are many activities practiced by banks that add very little value to the world. For example, one could argue that high frequency trading (beyond the point needed to provide market liquidity) adds very little value.
But banks allow people to exchange goods and services without having to barter. Banks allow people to store wealth and transport wealth and exchange both with other people without having to move around carts laden with gold and higher huge numbers of guards to keep it safe. Banks help to match together people who have capital ("investors", "savers") with people who could accomplish things if only they had capital ("borrowers","entrepreneurs") and facilitates them working together through interest payments.
Just as banks are far from useless (although some of the things they do add little value to humanity), so cryptocurrencies *MAY* be far from useless (although I agree the majority of people involved at this point are doing little more than engaging in a broad Ponzi scheme).
- imtringued 5y agoBanks offer loans which help finance businesses. You have a pretty direct connection to people that actually work in the real economy. They are the ones that are paying the loans back after all. Nobody would be crazy enough to take a loan denominated in Bitcoin. The Bitcoin community is basically dedicated to making it impossible to repay debts. Just think about it, every HODLer that joins the community makes it harder to repay your debt because they will never spend their Bitcoin on things your company produces. It's funny how low inflation or even deflation (if you consider 2% to be price stability) caused a rush of money into mortgage bonds and subsequently destabilized fiat currencies and cryptocurrencies try to beat fiat currencies on their way to becoming useless as a medium of exchange and subsequently make it useless for financing via debt.
- PretzelPirate 5y agoPeople take loans denominated in both WBTC and ETH everyday.
- arcticbull 5y ago> Nobody would be crazy enough to take a loan denominated in Bitcoin. You have too much faith in financial literacy of the participants in this market. [1] It doesn't really matter as much as you may think because they (1) are using these casino tokens to borrow more tokens to buy yet more tokens and (2) they see liquidations as a natural part of such lending. [1] https://cointelegraph.com/news/are-we-dumb-financial-illiterates-twice-as-likely-to-own-crypto https://cointelegraph.com/news/are-we-dumb-financial-illiter...
- arcticbull 5y ago> I work for a bank. Applying your analysis, one could argue that banks offer zero intrinsic value. After all, all they allow you to do is to move money around back and forth between different people. What I meant was that it's the bank shares that capture the value you describe, not dollars. And because the bank does create the value you describe, the shareholders of that bank are rewarded by and increase in shareholder equity value. There's no reason for the intrinsic value of dollars to go up because banks exist beyond their value increase attributable to a growth in GDP as a result. The role you describe here maps to miners, which are in fact the third party that in aggregate facilitates bitcoin transactions. They are rewarded via block rewards for this service which similarly increases their shareholder equity. Bitcoin doesn't enable people to move bitcoins between wallets, miners do. Bitcoin basically unbundles the services banks provide, but it doesn't internalize them or capture the value they create.