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I'm a crypto bear myself, but I'm not sure I agree with this argument. Plenty of services are built around "just moving money around" - accounting in this way h

I'm a crypto bear myself, but I'm not sure I agree with this argument. Plenty of services are built around "just moving money around" - accounting in this way has a ton of real value or else stripe, visa, paypal etc wouldn't be the huge companies they are. The questions are, whether "investing" by buying and holding is the right way to capture the value that this produces, and whether the benefits of doing it on a distributed blockchain outweigh the costs.

BoiledCabbage 5y ago
visa, paypal... all provide value in allowing commercial transitions. Exchange of goods and services, digitally or on credit. The value it is providing is eliminating the inefficiency of barter (which cash also does), and allowing remote digital transactions, again good for societal benefit. There is no societal benefit to buying, holding, selling a crypto currency. The thing that could provide societal value is smart contracts - but that has nothing to do with crypto. Visa (or Stripe) could implement smart contracts in javascript on top of their platform and society gets pretty much all of the benefits without needing any of the crypto.
- swader999 5y ago
  There is value in having a monetary system though. And if BTC is a better system and more people find it's utility for barter or wealth preservation better it might appreciate more in relation to something like the USD which has many different characteristics.
  - arcticbull 5y ago
    It's a strictly worse monetary system by any measure. It's massively more expensive to transact, it's unbelievably inefficient - requiring as much power as Thailand and generating as much e-waste as the Netherlands to scribble 2-3 tx/sec into a ledger. That's 60 days of power for the average US household and 1 iPad of e-waste per transaction. [1] [edit](97% of all mining hardware will be thrown away without ever winning a single block reward). If adopted as an actual currency it would immediately lead to a deflationary spiral savaging the job market. [2] Even the dictator of El Salvador wasn't nuts enough to adopt it as an actual currency. All pricing continues to be in USD and exchanged for BTC at the point of sale - and the point of a gun. (Keep in mind legal tender laws in ES require everyone to accept your Bitcoin for purchases or you face criminal charges). To call it wholly unfit for any purpose except exchanging for black tar heroin would be an understatement. [1] https://digiconomist.net/bitcoin-energy-consumption https://digiconomist.net/bitcoin-energy-consumption [2] https://www.investopedia.com/terms/d/deflationary-spiral.asp https://www.investopedia.com/terms/d/deflationary-spiral.asp
    - FabHK 5y ago
      Given the capacity of the BTC blockchain, if everyone one earth finally adopted BTC (as some people dream about), everyone could get in about one transaction in their lifetime. (3 tx/sec = 3 tx/sec * 31m sec/a = 100m tx/a = 10bn tx/100a, so the network supports 10 bn transactions in about 100 years, and there are about 10bn people on earth, each living around 100 years.)
      - arcticbull 5y ago
        This is also one of the reasons Lightning is not a viable scaling solution. If you don't get your LN channel open soon, you'll be waiting until the year 2120. This will also of course consume 100% of the remaining block reward and almost a trillion dollars in electricity. That, and the quadratic routing complexity.
    - jkhdigital 5y ago
      > 97% of all mining hardware will be thrown away without ever winning a single block reward And fewer than 50% of Thoroughbred horses ever win a single race. This is a silly clickbaity statistic and you know it. Come on, you're better than this arcticbull ;-)
      - wpietri 5y ago
        Horse racing is actually a pretty good analogy here, in that it's essentially pointless and an awful lot more money goes in than comes out. The big difference is that at least horse racing produces a fair bit of entertainment value, and that a lot of people truly love their horses.
      - arcticbull 5y ago
        Is that actually a real statistic about horses? That's fascinating. I wouldn't build a currency on it though ;) Step right up to Horsecoin, fastest horse gets the block!
        swader999 5y ago
  - bduerst 5y ago
    There is value in having a useful monetary system. That ship sailed (multiple times) during the block size debacle for bitcoin, and there isn't nearly enough adoption with other cryptos to make them a useful payment system (aside from Monero if you're doing illegal activities)
- sumedh 5y ago
  > There is no societal benefit to buying, holding, selling a crypto currency. If you live a country where the govt mismanages the economy and drop the value of the nation's currency then in that case BTC has a lot of value.
  - arcticbull 5y ago
    In most of those countries the transaction fee is a non-trivial percentage of the GDP. Using it as a currency there would be economic suicide. And the volatility would be crushing to the poor. They'd be infinitely better off with like USDC or better yet, a USD issued CBDC.
  - wpietri 5y ago
    If you live in a country where the government mismanages the economy or the currency, Bitcoin is not a great choice. What most people use in that situation is just a different national currency. This is a well-known phenomenon known as dollarization or currency substitution: https://en.wikipedia.org/wiki/Currency_substitution https://en.wikipedia.org/wiki/Currency_substitution
- yellow_postit 5y ago
  More and more I wonder if there’s a cultural/community aspect to crypto. Humans are meaning and group seeking animals and there is a hard to break value from that relationship. While some are likely ephemeral (hype coins like shiba) the amount of community formed around ETH and BTC is non-trivial and provides something akin to “value”.
  - wpietri 5y ago
    For sure. Bitcoin is in some ways better understood as a religion. If you're interested, I'd suggest the documentary LuLaRich, currently on Amazon Prime Video. It looks at the MLM/pyramid scheme LuLaRoe and does a good job conveying the quasi-religious nature of these things.
arcticbull 5y ago
That's not quite correct, although I understand your sentiment. When you own a share of Square (or Visa, or PayPal) each time a transaction takes place on their network, a portion of that transaction (revenue minus costs) accrues to the company - and by extension increases the intrinsic value of your share. The transaction revenue is spent on furniture, on R&D, on employees and on buffing up their cash position. As a shareholder, you benefit from every single transaction made on their network. On the other hand with cryptocurrencies like Bitcoin, as a holder of Bitcoin you are a customer not an owner. You lose money on every transaction. That value accrues to miners, and by extension, your local PE firm re-opening a fossil fuel power plant or the Kazakh coal mining complex. Square shares ~= Hut8 shares. Bitcoin ~= a Starbucks gift card you hope appreciates in value when Starbucks sells more coffee. Currently there are enough, uh, savvy investors who think it should, so it does. In accounting terms, it won't though because that benefit accrues to shareholders of mining companies, which you are not. You hold a gift card. One that costs money to spend so must be worth less than face value. Bitcoin is a strongly negative sum MLM, or if you agree with jstolfi, a Ponzi scheme with a fresh coat of paint. [1] The network currently costs $60M per day to operate. That's $21B per year in new money that has to come in to prop up the price. [edit](And all that money goes to burning coal and throwing away mining hardware). [1] https://www.ic.unicamp.br/~stolfi/bitcoin/2020-12-31-bitcoin-ponzi.html https://www.ic.unicamp.br/~stolfi/bitcoin/2020-12-31-bitcoin...
- DennisP 5y ago
  On Ethereum, the majority of transaction fees are burned. In effect, they are distributed to ETH holders in the same way that stock buybacks distribute corporate revenues.
  - mrep 5y ago
    I disagree, crypto incentivizes to add more miners such that equipment + electricity = revenue so there is no profit. Stock buybacks effectively transfer income into the share price so that when you sell your stock it will be for a higher price and thus you will make a profit.
wpietri 5y ago
I think you're stretching my meaning a bit here. Money transfer services do convey money from one person to another, and along the way they may provide additional services. But the focus there is on the service provided. I don't just put money into my American Express card in hopes that I somehow get more money back later; their job is to give money to merchants I patronize while protecting us both from certain problems and risks. What I'm talking to is more along the lines of poker games and Ponzi schemes, both of which "just move money around" in the sense that no more money comes out than goes in, even though certain individuals may do better than others. Buying a cryptocurrency as an "investment" is much more like the latter than the former.

BoiledCabbage 5y ago

visa, paypal... all provide value in allowing commercial transitions. Exchange of goods and services, digitally or on credit. The value it is providing is eliminating the inefficiency of barter (which cash also does), and allowing remote digital transactions, again good for societal benefit. There is no societal benefit to buying, holding, selling a crypto currency. The thing that could provide societal value is smart contracts - but that has nothing to do with crypto. Visa (or Stripe) could implement smart contracts in javascript on top of their platform and society gets pretty much all of the benefits without needing any of the crypto.

swader999 5y ago
There is value in having a monetary system though. And if BTC is a better system and more people find it's utility for barter or wealth preservation better it might appreciate more in relation to something like the USD which has many different characteristics.
- arcticbull 5y ago
  It's a strictly worse monetary system by any measure. It's massively more expensive to transact, it's unbelievably inefficient - requiring as much power as Thailand and generating as much e-waste as the Netherlands to scribble 2-3 tx/sec into a ledger. That's 60 days of power for the average US household and 1 iPad of e-waste per transaction. [1] [edit](97% of all mining hardware will be thrown away without ever winning a single block reward). If adopted as an actual currency it would immediately lead to a deflationary spiral savaging the job market. [2] Even the dictator of El Salvador wasn't nuts enough to adopt it as an actual currency. All pricing continues to be in USD and exchanged for BTC at the point of sale - and the point of a gun. (Keep in mind legal tender laws in ES require everyone to accept your Bitcoin for purchases or you face criminal charges). To call it wholly unfit for any purpose except exchanging for black tar heroin would be an understatement. [1] https://digiconomist.net/bitcoin-energy-consumption https://digiconomist.net/bitcoin-energy-consumption [2] https://www.investopedia.com/terms/d/deflationary-spiral.asp https://www.investopedia.com/terms/d/deflationary-spiral.asp
  - FabHK 5y ago
    Given the capacity of the BTC blockchain, if everyone one earth finally adopted BTC (as some people dream about), everyone could get in about one transaction in their lifetime. (3 tx/sec = 3 tx/sec * 31m sec/a = 100m tx/a = 10bn tx/100a, so the network supports 10 bn transactions in about 100 years, and there are about 10bn people on earth, each living around 100 years.)
    - arcticbull 5y ago
      This is also one of the reasons Lightning is not a viable scaling solution. If you don't get your LN channel open soon, you'll be waiting until the year 2120. This will also of course consume 100% of the remaining block reward and almost a trillion dollars in electricity. That, and the quadratic routing complexity.
  - jkhdigital 5y ago
    > 97% of all mining hardware will be thrown away without ever winning a single block reward And fewer than 50% of Thoroughbred horses ever win a single race. This is a silly clickbaity statistic and you know it. Come on, you're better than this arcticbull ;-)
    - wpietri 5y ago
      Horse racing is actually a pretty good analogy here, in that it's essentially pointless and an awful lot more money goes in than comes out. The big difference is that at least horse racing produces a fair bit of entertainment value, and that a lot of people truly love their horses.
    - arcticbull 5y ago
      Is that actually a real statistic about horses? That's fascinating. I wouldn't build a currency on it though ;) Step right up to Horsecoin, fastest horse gets the block!
      - swader999 5y ago
- bduerst 5y ago
  There is value in having a useful monetary system. That ship sailed (multiple times) during the block size debacle for bitcoin, and there isn't nearly enough adoption with other cryptos to make them a useful payment system (aside from Monero if you're doing illegal activities)
sumedh 5y ago
> There is no societal benefit to buying, holding, selling a crypto currency. If you live a country where the govt mismanages the economy and drop the value of the nation's currency then in that case BTC has a lot of value.
- arcticbull 5y ago
  In most of those countries the transaction fee is a non-trivial percentage of the GDP. Using it as a currency there would be economic suicide. And the volatility would be crushing to the poor. They'd be infinitely better off with like USDC or better yet, a USD issued CBDC.
- wpietri 5y ago
  If you live in a country where the government mismanages the economy or the currency, Bitcoin is not a great choice. What most people use in that situation is just a different national currency. This is a well-known phenomenon known as dollarization or currency substitution: https://en.wikipedia.org/wiki/Currency_substitution https://en.wikipedia.org/wiki/Currency_substitution
yellow_postit 5y ago
More and more I wonder if there’s a cultural/community aspect to crypto. Humans are meaning and group seeking animals and there is a hard to break value from that relationship. While some are likely ephemeral (hype coins like shiba) the amount of community formed around ETH and BTC is non-trivial and provides something akin to “value”.
- wpietri 5y ago
  For sure. Bitcoin is in some ways better understood as a religion. If you're interested, I'd suggest the documentary LuLaRich, currently on Amazon Prime Video. It looks at the MLM/pyramid scheme LuLaRoe and does a good job conveying the quasi-religious nature of these things.

arcticbull 5y ago

That's not quite correct, although I understand your sentiment. When you own a share of Square (or Visa, or PayPal) each time a transaction takes place on their network, a portion of that transaction (revenue minus costs) accrues to the company - and by extension increases the intrinsic value of your share. The transaction revenue is spent on furniture, on R&D, on employees and on buffing up their cash position. As a shareholder, you benefit from every single transaction made on their network. On the other hand with cryptocurrencies like Bitcoin, as a holder of Bitcoin you are a customer not an owner. You lose money on every transaction. That value accrues to miners, and by extension, your local PE firm re-opening a fossil fuel power plant or the Kazakh coal mining complex. Square shares ~= Hut8 shares. Bitcoin ~= a Starbucks gift card you hope appreciates in value when Starbucks sells more coffee. Currently there are enough, uh, savvy investors who think it should, so it does. In accounting terms, it won't though because that benefit accrues to shareholders of mining companies, which you are not. You hold a gift card. One that costs money to spend so must be worth less than face value. Bitcoin is a strongly negative sum MLM, or if you agree with jstolfi, a Ponzi scheme with a fresh coat of paint. [1] The network currently costs $60M per day to operate. That's $21B per year in new money that has to come in to prop up the price. [edit](And all that money goes to burning coal and throwing away mining hardware). [1] https://www.ic.unicamp.br/~stolfi/bitcoin/2020-12-31-bitcoin-ponzi.html https://www.ic.unicamp.br/~stolfi/bitcoin/2020-12-31-bitcoin...

DennisP 5y ago
On Ethereum, the majority of transaction fees are burned. In effect, they are distributed to ETH holders in the same way that stock buybacks distribute corporate revenues.
- mrep 5y ago
  I disagree, crypto incentivizes to add more miners such that equipment + electricity = revenue so there is no profit. Stock buybacks effectively transfer income into the share price so that when you sell your stock it will be for a higher price and thus you will make a profit.

wpietri 5y ago

I think you're stretching my meaning a bit here. Money transfer services do convey money from one person to another, and along the way they may provide additional services. But the focus there is on the service provided. I don't just put money into my American Express card in hopes that I somehow get more money back later; their job is to give money to merchants I patronize while protecting us both from certain problems and risks. What I'm talking to is more along the lines of poker games and Ponzi schemes, both of which "just move money around" in the sense that no more money comes out than goes in, even though certain individuals may do better than others. Buying a cryptocurrency as an "investment" is much more like the latter than the former.