9 ms·

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 thei

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.
  - DennisP 5y ago
    But most of the fee revenue isn't going to the miners, it's being destroyed. And sometime in the first half of next year there won't be any miners; with the reduced issuance, the ETH supply will begin to shrink.
wyager 5y ago
> Bitcoin ~= a Starbucks gift card you hope appreciates in value when Starbucks sells more coffee Are you under the impression that Bitcoin is a company? This analogy really doesn't make sense from any angle, even being extremely charitable, so it's hard to address.
- arcticbull 5y ago
  Bitcoin is a combination of a set of tokens, BTC, and a set of miners. Miners are either sole proprietors or, increasingly, publicly traded companies which operate the network collectively. When a transaction takes place, value is extracted from the BTC everyone holds and is transferred to these entities. The more transactions take place, the more value accrues to miners, not to holders. It's in fact taken from holders. Miners become more valuable, and the value accrues to these mining entities, which frequently means to shareholders in the public markets. Starbucks cards are akin to pre-selling coffee tokens. Each time Starbucks redeems these coffee tokens for coffee, they collect a portion of the transaction just as miners do. And just as miners do, they pass on the majority to their suppliers and employees. Just as in the Bitcoin example, the fact Starbucks is selling tons of coffee, collecting a lot of transaction fees, doesn't mean that the Starbucks cards themselves become more valuable. Starbucks Inc, and Starbucks shares do, and that value accrues to their shareholders. I hope that clarifies my thoughts. Open to being wrong about this framing.
  - wyager 5y ago
    An important thing you may not be aware of is that Bitcoin’s “dilution schedule”, so to speak, is fixed in advance. 88% of “shares” have been issued. This is, in fact, a critical advantage Bitcoin has over a ton of shitcoins - fixed dilution schedule, and no pre-mine/creator subsidy.
jbusma 5y ago
As a holder of crypto, you are both a customer and an owner. You pay a fee for each transaction you send, just like any other service. b However, your holdings increase in value the more other people use the same chain because the value of the entire ecosystem needs to scale proportionally to the value people are attempting to transact across it. Financial systems, like social networks, and most businesses coming out of SV rely on network effects for much of their value. USD has been the default option for the world, and enforced through violence when people attempt to create their own networks of trade. The positive sum value that cryptocurrency is attempting to create is the ability to send anyone in the world any amount of value (money or otherwise) not subject to government permission, or sabotage (ie money printing) It's like any one being able to suggest a Federal Reserve policy, and the vote being handled by the people, not representatives or a committee. It is revolutionarily democratic.
- deleted 5y ago
  [deleted]
  - cinntaile 5y ago
    > You're completely twisted up. This is largely tinfoil hat economics and conspiracy theories. It's ok to disagree without resorting to arguments like these, they just poison the discussion.
- wpietri 5y ago
  > USD has been the default option for the world, and enforced through violence when people attempt to create their own networks of trade. Hah! Of course, who can forget how US paratroopers abruptly ended the attempted creation of the Euro shortly before its intended launch in 1999. Or the way the US Seventh Fleet blockaded China's commercial ports starting in 2002, preventing their rise as a commercial power. We can only wonder what a world with multilateral economic power might look like.
caf 5y ago
This all sounds intuitively correct, and it seems that similar arguments can be made about gold bullion, right? It costs some amount of money every year to mine, refine, transport and store it, and none of that is accruing to the actual holders of bullion. (One difference being that there is some residual value of the gold for industrial and jewellery uses, but that's hardly what's keeping the bullion price where it is).
- arcticbull 5y ago
  It's similar gold, yes. Gold is an unproductive asset. You are correct that there is base demand for it in the form of jewelry and electronics. In fact, a percentage of the world's gold output goes into making Bitcoin miners each year. However, its value is not supported by its demand in these industries. This is why I personally do not invest in gold. The difference is that if you shut down gold mining, existing gold would still retain all its value. If you were unable to protect your gold reserves, they still retain all their value. If you shut down Bitcoin mining it's immediately worth nothing. In fact if you reduce your energy expenditure below some unspecified threshold it becomes utterly worthless. Mining gold consumes resources, but once extracted it does not. I would consider it to be zero-sum, as compared to the negative-sum nature of Bitcoin. I would argue if institutional demand and even jewelry demand for gold fell, it would still be a fairly valuable commodity, and its use in electronics would likely expand substantially as it became less expensive. Connectors, switches, wires, PCB contact plating. All big demand drivers, and gold is better than the status quo - just too expensive at the moment.
  - caf 5y ago
    There are still holding costs for it, though - the guards at the New York Federal Reserve don't work for free - so doesn't it have a similar "value continuously leaving the system" dynamic that suggests that it's negative-sum? Maybe the answer is that the quanta of value leaving is so minimal compared the the amount invested in the stock of bullion that "ever so slightly negative-sum" and "zero-sum" are the same to a first approximation.
  - irae 5y ago
    > If you shut down Bitcoin mining it's immediately worth nothing. Except that it is impossible ever shut down Bitcoin mining at once(). It might be more similar to gold than what you think. There are too many incentives to keep it up. The holders want value to be kept, the miners have vested interest in the system to continue to work. If you shut down, say, half the miners, this will create opportunity to other miners to invest and expand. If it drops too much, people inject money into the system, which gives liquidity to the miners again, that can continue to trade their work for goods and services with Bitcoin or by trading Bitcoin for fiat. It is very similar to Visa, Mastercard, Stripe, Square and other centralized systems. The fees you pay for transactions keep the centralized finance business working and profitable as well as they invest back in software and hardware. For miners the Bitcoin fees, based on Bitcoin price, keep their systems profitable too. Not to mention some mining companies started to get listed on the stock market too. (): Yes, you can shut down Bitcoin eventually, bugs, attacks, etc., but those have been tried and not very relevant to my point.
RustyConsul 5y ago
Also, not quite correct. Bitcoin isn't figuratively a store of value, it actually is. The amount of bitcoin on DeFi, backing collateral for flash loans and Stablecoin minting is astounding. >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. All the V3 crypto protocols have exactly as you describe above. However, instead of the money going into the coffers of the company, it goes into a 'Development fund' That will award the crypto to people who have applied and been voted on by the community to launch a project/technology in the protocol. [1] https://fintechs.fi/2021/10/29/as-parachain-auctions-launch-close-in-polkadot-introduces-777m-dev-fund/ https://fintechs.fi/2021/10/29/as-parachain-auctions-launch-...
- arcticbull 5y ago
  > Bitcoin isn't figuratively a store of value, it actually is. It's a speculative, negative-sum MLM token. I suggest reading up on what a store of value is. [1] I'm not saying there aren't ways of monetizing it within the network - which may indeed create value, but intrinsically, it is a negative-sum asset, a mechanism of redistributing real cold hard dollars from new participants to old entrants and miners. It creates nothing. Systems built on top of it might, exploiting let's say regulatory arbitrage, facilitating crime or gambling, but intrinsically, it creates no value. [1] https://www.investopedia.com/terms/s/storeofvalue.asp https://www.investopedia.com/terms/s/storeofvalue.asp
  - RustyConsul 5y ago
    It seems our difference in opinion comes from our definition of value. I know people point to the current system and infrastructure of stock exchanges, SWIFT, the IMF, Central Banks, Retail and Commercial Banks, Internet Banks (Such as Stripe, Paypal, ETC.), Credit Unions, Savings and Loan Associations, Investment Banks and Companies, Brokerage Firms, Insurance Companies as working good enough. But for me... Occams razor hits me hard. Doesn't it seem weird that through this complex system of interactions, we can recreate all of that in Code? If there was no value in it, why did we create all those institutions in the first place? If we can recreate those in a more humane, democratized, decentralized way, I think it's worth the .001% of the global financial system that it currently is. Even if it's grabbing 5% of the current headlines.
ButtSpark69 5y ago
As an Eth staker I get paid for a portion of every transaction that the network processes.

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.
- DennisP 5y ago
  But most of the fee revenue isn't going to the miners, it's being destroyed. And sometime in the first half of next year there won't be any miners; with the reduced issuance, the ETH supply will begin to shrink.

wyager 5y ago

> Bitcoin ~= a Starbucks gift card you hope appreciates in value when Starbucks sells more coffee Are you under the impression that Bitcoin is a company? This analogy really doesn't make sense from any angle, even being extremely charitable, so it's hard to address.

arcticbull 5y ago
Bitcoin is a combination of a set of tokens, BTC, and a set of miners. Miners are either sole proprietors or, increasingly, publicly traded companies which operate the network collectively. When a transaction takes place, value is extracted from the BTC everyone holds and is transferred to these entities. The more transactions take place, the more value accrues to miners, not to holders. It's in fact taken from holders. Miners become more valuable, and the value accrues to these mining entities, which frequently means to shareholders in the public markets. Starbucks cards are akin to pre-selling coffee tokens. Each time Starbucks redeems these coffee tokens for coffee, they collect a portion of the transaction just as miners do. And just as miners do, they pass on the majority to their suppliers and employees. Just as in the Bitcoin example, the fact Starbucks is selling tons of coffee, collecting a lot of transaction fees, doesn't mean that the Starbucks cards themselves become more valuable. Starbucks Inc, and Starbucks shares do, and that value accrues to their shareholders. I hope that clarifies my thoughts. Open to being wrong about this framing.
- wyager 5y ago
  An important thing you may not be aware of is that Bitcoin’s “dilution schedule”, so to speak, is fixed in advance. 88% of “shares” have been issued. This is, in fact, a critical advantage Bitcoin has over a ton of shitcoins - fixed dilution schedule, and no pre-mine/creator subsidy.

jbusma 5y ago

As a holder of crypto, you are both a customer and an owner. You pay a fee for each transaction you send, just like any other service. b However, your holdings increase in value the more other people use the same chain because the value of the entire ecosystem needs to scale proportionally to the value people are attempting to transact across it. Financial systems, like social networks, and most businesses coming out of SV rely on network effects for much of their value. USD has been the default option for the world, and enforced through violence when people attempt to create their own networks of trade. The positive sum value that cryptocurrency is attempting to create is the ability to send anyone in the world any amount of value (money or otherwise) not subject to government permission, or sabotage (ie money printing) It's like any one being able to suggest a Federal Reserve policy, and the vote being handled by the people, not representatives or a committee. It is revolutionarily democratic.

deleted 5y ago
[deleted]
- cinntaile 5y ago
  > You're completely twisted up. This is largely tinfoil hat economics and conspiracy theories. It's ok to disagree without resorting to arguments like these, they just poison the discussion.
wpietri 5y ago
> USD has been the default option for the world, and enforced through violence when people attempt to create their own networks of trade. Hah! Of course, who can forget how US paratroopers abruptly ended the attempted creation of the Euro shortly before its intended launch in 1999. Or the way the US Seventh Fleet blockaded China's commercial ports starting in 2002, preventing their rise as a commercial power. We can only wonder what a world with multilateral economic power might look like.

caf 5y ago

This all sounds intuitively correct, and it seems that similar arguments can be made about gold bullion, right? It costs some amount of money every year to mine, refine, transport and store it, and none of that is accruing to the actual holders of bullion. (One difference being that there is some residual value of the gold for industrial and jewellery uses, but that's hardly what's keeping the bullion price where it is).

arcticbull 5y ago
It's similar gold, yes. Gold is an unproductive asset. You are correct that there is base demand for it in the form of jewelry and electronics. In fact, a percentage of the world's gold output goes into making Bitcoin miners each year. However, its value is not supported by its demand in these industries. This is why I personally do not invest in gold. The difference is that if you shut down gold mining, existing gold would still retain all its value. If you were unable to protect your gold reserves, they still retain all their value. If you shut down Bitcoin mining it's immediately worth nothing. In fact if you reduce your energy expenditure below some unspecified threshold it becomes utterly worthless. Mining gold consumes resources, but once extracted it does not. I would consider it to be zero-sum, as compared to the negative-sum nature of Bitcoin. I would argue if institutional demand and even jewelry demand for gold fell, it would still be a fairly valuable commodity, and its use in electronics would likely expand substantially as it became less expensive. Connectors, switches, wires, PCB contact plating. All big demand drivers, and gold is better than the status quo - just too expensive at the moment.
- caf 5y ago
  There are still holding costs for it, though - the guards at the New York Federal Reserve don't work for free - so doesn't it have a similar "value continuously leaving the system" dynamic that suggests that it's negative-sum? Maybe the answer is that the quanta of value leaving is so minimal compared the the amount invested in the stock of bullion that "ever so slightly negative-sum" and "zero-sum" are the same to a first approximation.
- irae 5y ago
  > If you shut down Bitcoin mining it's immediately worth nothing. Except that it is impossible ever shut down Bitcoin mining at once(). It might be more similar to gold than what you think. There are too many incentives to keep it up. The holders want value to be kept, the miners have vested interest in the system to continue to work. If you shut down, say, half the miners, this will create opportunity to other miners to invest and expand. If it drops too much, people inject money into the system, which gives liquidity to the miners again, that can continue to trade their work for goods and services with Bitcoin or by trading Bitcoin for fiat. It is very similar to Visa, Mastercard, Stripe, Square and other centralized systems. The fees you pay for transactions keep the centralized finance business working and profitable as well as they invest back in software and hardware. For miners the Bitcoin fees, based on Bitcoin price, keep their systems profitable too. Not to mention some mining companies started to get listed on the stock market too. (): Yes, you can shut down Bitcoin eventually, bugs, attacks, etc., but those have been tried and not very relevant to my point.

RustyConsul 5y ago

Also, not quite correct. Bitcoin isn't figuratively a store of value, it actually is. The amount of bitcoin on DeFi, backing collateral for flash loans and Stablecoin minting is astounding. >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. All the V3 crypto protocols have exactly as you describe above. However, instead of the money going into the coffers of the company, it goes into a 'Development fund' That will award the crypto to people who have applied and been voted on by the community to launch a project/technology in the protocol. [1] https://fintechs.fi/2021/10/29/as-parachain-auctions-launch-close-in-polkadot-introduces-777m-dev-fund/ https://fintechs.fi/2021/10/29/as-parachain-auctions-launch-...

arcticbull 5y ago
> Bitcoin isn't figuratively a store of value, it actually is. It's a speculative, negative-sum MLM token. I suggest reading up on what a store of value is. [1] I'm not saying there aren't ways of monetizing it within the network - which may indeed create value, but intrinsically, it is a negative-sum asset, a mechanism of redistributing real cold hard dollars from new participants to old entrants and miners. It creates nothing. Systems built on top of it might, exploiting let's say regulatory arbitrage, facilitating crime or gambling, but intrinsically, it creates no value. [1] https://www.investopedia.com/terms/s/storeofvalue.asp https://www.investopedia.com/terms/s/storeofvalue.asp
- RustyConsul 5y ago
  It seems our difference in opinion comes from our definition of value. I know people point to the current system and infrastructure of stock exchanges, SWIFT, the IMF, Central Banks, Retail and Commercial Banks, Internet Banks (Such as Stripe, Paypal, ETC.), Credit Unions, Savings and Loan Associations, Investment Banks and Companies, Brokerage Firms, Insurance Companies as working good enough. But for me... Occams razor hits me hard. Doesn't it seem weird that through this complex system of interactions, we can recreate all of that in Code? If there was no value in it, why did we create all those institutions in the first place? If we can recreate those in a more humane, democratized, decentralized way, I think it's worth the .001% of the global financial system that it currently is. Even if it's grabbing 5% of the current headlines.

ButtSpark69 5y ago

As an Eth staker I get paid for a portion of every transaction that the network processes.