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> It would hard for me to make a case that eventually cryptocurrency will fail. It's easy for me to make that case. Ransomware aside, there's no underlying val

> It would hard for me to make a case that eventually cryptocurrency will fail. It's easy for me to make that case. Ransomware aside, there's no underlying value in cryptocurrency, unlike currencies which have the full faith and credit of governments. This is a fundamental problem that I see no way around.

exdsq 5y ago
I’d argue there’s an underlying value in tokens like Ether that is similar to paying for compute power and storage on AWS. I’m not saying the price right now is correct, but that there is an intrinsic value.
- not2b 5y ago
  It cost compute power to produce the tokens, but that's sunk cost, not intrinsic. All that matters afterward is whether people want the tokens and will exchange things of value for them.
  - colejohnson66 5y ago
    Is fiat currency any different? My coins and bills don't have any intrinsic value either, but they are still currency.
    - not2b 5y ago
      If your debts and bills are denominated in the currency of your country, the bills and coins have value because you know how many of them you need to pay what you owe. So yes, if we ever got to the stage where your rent is priced in some coin, that coin would correspond to a currency. But until then, it's more like a volatile stock and "currency" is a misnomer.
  - ahtihn 5y ago
    I think the intrinsic value is coming from the fact that you need to spend eth to run smart contracts on the Ethereum blockchain.
  - exdsq 5y ago
    I mean the use of those to power arbitrary computation on the network. It’s not dissimilar to AWS tokens.
willob33 5y ago
What if the value store is the network itself. At this point currency is an abstraction relying on computers. I handle cash personally once a month. Amazon cashier-less stores are just as much to normalize the behavior of not paying as reducing jobs). Producing currency, securing it, moving it, the old banking infra just for finance management has a huge environmental impact. Banks are easily socially engineered. Corruption is rife. Eth shouldn’t be pegged to a dollar. It’s not a currency. It’s an information network. What crypto should be is not property but the technical network abstraction we develop and roll over. Grifters are trying to generate traditional wealth off the idea it’s a literal thing but we could just keep rolling new protocols out. Up to you to store your work. It’s a logical substrate for transmitting and storing information that can’t be monopolized like physical money if we see it as such. Unlike banks with full vaults, ephemeral network control can be coded out. No one person can become a black hole with disproportionate pull on social agency.
leadingthenet 5y ago
> there's no underlying value in cryptocurrency Of course, there is a value: it's a decentralized write-only database that can be used for things like proof of ownership without the requirement of a central authority. A famous use-case is the illicit online drug trade, which cannot currently be achieved (to my knowledge) with fiat currencies. It might never replace government-backed currencies (or it just might, who knows), but to say it literally has no utility betrays a lack of knowledge about the system.
- Yizahi 5y ago
  No, it can't be used for "proof of ownership" at all. Crypto only barely works because it lives inside blockchain completely. Anything external to the blockchain (which is practically everything) can't be verified using blockchain. Only using some centralized and opaque/corrupt additions to the blockchain some rights can be maybe transferred (but not enforced even then), but at that point blockchain is useless can be safely removed if data is stored centrally.
  - ipaddr 5y ago
    It can be used for proof of ownership not to be confused with proof of identity because anyone can check the public blockchain to determine that funds sent from account a belongs to whoever setup account a. It allows proof ownership without proof of identity.
    - Yizahi 5y ago
      No it doesn't allow proof of ownership. Ownership is a set of intellectual rights encoded via laws. NFT can't do anything about IPs or laws, and won't be able in future.
      - ipaddr 5y ago
        Having a private key provides ownership over an account. That ownership allows you to transfer money. It allows you to accept money. This is outside of IP or laws. You can move money without laws. NFT are a differet topic. NFT are a way of having a digital token attached to something that can be used to determine ownership to an account. Do they need to be decentralized? No but it opens up ownership to all not just the approved.
erulabs 5y ago
I'm sure you'll roll your eyes at this response, but a large chunk of economists don't believe there is value in anything. Your definition of "value" might mean "utility" or "what the US treasury says this is worth", or something else entirely. Starting a discussion with "well, it doesn't have any value" is more or less meaningless, and borders on economically illiterate, excuse the harshness. My stuffed animal from when I was a baby has no "value", but I find it quite valuable. This isn't pendantics either - it determines more or less your entire economic perspective. If you believe in a utility or labor theory of value, of course crypto is a scam. A subjective theory? Not so much. If someone trades an ETH for a Dollar, has value been changed? Moved around? Created? Has someone been scammed? Has wealth been created? Has net happiness been increased? Value is an extremely non-trivial thing and will lead you to love or hate the exact same situation depending on your chosen definition. At any rate, I agree, crypto contains no value intrinsically. That said, I'm buying at the current price! Those crypto-fans who are saying "ah well the -network- has intrinsic value" are missing the point. Value does not exist in the world. Value is like beauty or color - it's a subjective experience. All statements in the form of "X has no value" must be concatenated with "to me". If anyone finds this incredibly interesting, and a fairly ignored part of epistemology, I strongly recommend reading Carl Menger's "The Origin of Money"
- dontreact 5y ago
  What's going to happen when people start trying to retire by selling crypto? Many people will be selling at the same time, and suddenly the subjective value for everyone will be lower because it will be easier and easier to buy it. My sense is that there is a cap on the demand for purchasing crypto, but the supply is very low because mining decreases over time, and generally people holding lots of crypto are younger and have no need to sell in order to pay for things, they can just pay with their fiat income. This equation will change drastically as people start to retire and need to sell lots of crypto in order to fund their lifestyle without working.
  - ipaddr 5y ago
    The value of whatever coin you have may go down. Planning a retirement around a lottery ticket is fun but you still stuff your retirement fund. Bitcoin slows down ensuring it's value continues to increase with fewer buyers. Proper retirement planning means moving from 100% risky in your 20s to 50/50 in your 40s to 10/90 in your 60s.
cogman10 5y ago
Most currencies have no underlying value. The value of a dollar is drawn from dollar supply and trust that others will accept and value the dollar. When a currency goes through hyperinflation, that generally happens because the government goes crazy printing the currency and the trust that others have in accepting the currency goes down. If crypto collapses, it will likely be because it just becomes computationally infeasible to work with. The problem with the blockchain is that every action on the blockchain requires the whole blockchain. As time goes on simply storing the blockchain will be something that's simply not reasonable. An issue specifically with bitcoin is that as time goes on, transferring a single coin in a day, month, or year becomes computationally impossible. Bitcoin is quickly rushing to a point where holders of bitcoin will be incapable of trading it. That, IMO, will be the collapse of crypto. If you can't move the currency, it doesn't matter how much others value it. It'll become a game of hot potato. with the last few holders getting more and more desperate to unload the potato for money.
- brandon272 5y ago
  Hyperinflation after money printing is not the result of "trust going down". It's the result of increased dollars increasing aggregate demand in a system that cannot keep up with productive capacity.
dwaite 5y ago
Thats the rub - a currency which you can't actually spend is more of a speculative investment. A currency which you can only exchange for other more stable currencies even more so. When you try to take a digital currency and exchange it for digital items and digital ownership, you do so in a realm where "information wants to be free" - ownership of data is not often as interesting a concept as you want. Finally, when you try to exchange digital currency for physical goods, you start to realize ownership itself only means anything as part of the existing legal constructs - a distributed ledger "title" will only be valid when the government says it is, and a successfully executed smart contract can be effectively overturned by a judge's order. The parties/exchanges that don't acknowledge any of this and push the decentralized, out-of-government-control messaging seem like they are tending to be the ones who are structured corporately to be highly resistant to being taken to court over false claims by their customers/victims.
captainmuon 5y ago
Why, there is value in crypocurrency. Maybe not the kind of value society actually wants. Crypto can be redeemed for drugs on the darknet. And you can use it to launder money, or to dirty money (taking your legitimate income and funneling it anonymously somewhere else). Many cryptocurrencies have been ruled securities. Securities are not "currencies", but still have value, don't they? Even if it is just speculative value (you don't know whether the underlying business is goiong to be successful, or if it is even a scam).

exdsq 5y ago

I’d argue there’s an underlying value in tokens like Ether that is similar to paying for compute power and storage on AWS. I’m not saying the price right now is correct, but that there is an intrinsic value.

not2b 5y ago
It cost compute power to produce the tokens, but that's sunk cost, not intrinsic. All that matters afterward is whether people want the tokens and will exchange things of value for them.
- colejohnson66 5y ago
  Is fiat currency any different? My coins and bills don't have any intrinsic value either, but they are still currency.
  - not2b 5y ago
    If your debts and bills are denominated in the currency of your country, the bills and coins have value because you know how many of them you need to pay what you owe. So yes, if we ever got to the stage where your rent is priced in some coin, that coin would correspond to a currency. But until then, it's more like a volatile stock and "currency" is a misnomer.
- ahtihn 5y ago
  I think the intrinsic value is coming from the fact that you need to spend eth to run smart contracts on the Ethereum blockchain.
- exdsq 5y ago
  I mean the use of those to power arbitrary computation on the network. It’s not dissimilar to AWS tokens.

willob33 5y ago

What if the value store is the network itself. At this point currency is an abstraction relying on computers. I handle cash personally once a month. Amazon cashier-less stores are just as much to normalize the behavior of not paying as reducing jobs). Producing currency, securing it, moving it, the old banking infra just for finance management has a huge environmental impact. Banks are easily socially engineered. Corruption is rife. Eth shouldn’t be pegged to a dollar. It’s not a currency. It’s an information network. What crypto should be is not property but the technical network abstraction we develop and roll over. Grifters are trying to generate traditional wealth off the idea it’s a literal thing but we could just keep rolling new protocols out. Up to you to store your work. It’s a logical substrate for transmitting and storing information that can’t be monopolized like physical money if we see it as such. Unlike banks with full vaults, ephemeral network control can be coded out. No one person can become a black hole with disproportionate pull on social agency.

leadingthenet 5y ago

> there's no underlying value in cryptocurrency Of course, there is a value: it's a decentralized write-only database that can be used for things like proof of ownership without the requirement of a central authority. A famous use-case is the illicit online drug trade, which cannot currently be achieved (to my knowledge) with fiat currencies. It might never replace government-backed currencies (or it just might, who knows), but to say it literally has no utility betrays a lack of knowledge about the system.

Yizahi 5y ago
No, it can't be used for "proof of ownership" at all. Crypto only barely works because it lives inside blockchain completely. Anything external to the blockchain (which is practically everything) can't be verified using blockchain. Only using some centralized and opaque/corrupt additions to the blockchain some rights can be maybe transferred (but not enforced even then), but at that point blockchain is useless can be safely removed if data is stored centrally.
- ipaddr 5y ago
  It can be used for proof of ownership not to be confused with proof of identity because anyone can check the public blockchain to determine that funds sent from account a belongs to whoever setup account a. It allows proof ownership without proof of identity.
  - Yizahi 5y ago
    No it doesn't allow proof of ownership. Ownership is a set of intellectual rights encoded via laws. NFT can't do anything about IPs or laws, and won't be able in future.
    - ipaddr 5y ago
      Having a private key provides ownership over an account. That ownership allows you to transfer money. It allows you to accept money. This is outside of IP or laws. You can move money without laws. NFT are a differet topic. NFT are a way of having a digital token attached to something that can be used to determine ownership to an account. Do they need to be decentralized? No but it opens up ownership to all not just the approved.

erulabs 5y ago

I'm sure you'll roll your eyes at this response, but a large chunk of economists don't believe there is value in anything. Your definition of "value" might mean "utility" or "what the US treasury says this is worth", or something else entirely. Starting a discussion with "well, it doesn't have any value" is more or less meaningless, and borders on economically illiterate, excuse the harshness. My stuffed animal from when I was a baby has no "value", but I find it quite valuable. This isn't pendantics either - it determines more or less your entire economic perspective. If you believe in a utility or labor theory of value, of course crypto is a scam. A subjective theory? Not so much. If someone trades an ETH for a Dollar, has value been changed? Moved around? Created? Has someone been scammed? Has wealth been created? Has net happiness been increased? Value is an extremely non-trivial thing and will lead you to love or hate the exact same situation depending on your chosen definition. At any rate, I agree, crypto contains no value intrinsically. That said, I'm buying at the current price! Those crypto-fans who are saying "ah well the -network- has intrinsic value" are missing the point. Value does not exist in the world. Value is like beauty or color - it's a subjective experience. All statements in the form of "X has no value" must be concatenated with "to me". If anyone finds this incredibly interesting, and a fairly ignored part of epistemology, I strongly recommend reading Carl Menger's "The Origin of Money"

dontreact 5y ago
What's going to happen when people start trying to retire by selling crypto? Many people will be selling at the same time, and suddenly the subjective value for everyone will be lower because it will be easier and easier to buy it. My sense is that there is a cap on the demand for purchasing crypto, but the supply is very low because mining decreases over time, and generally people holding lots of crypto are younger and have no need to sell in order to pay for things, they can just pay with their fiat income. This equation will change drastically as people start to retire and need to sell lots of crypto in order to fund their lifestyle without working.
- ipaddr 5y ago
  The value of whatever coin you have may go down. Planning a retirement around a lottery ticket is fun but you still stuff your retirement fund. Bitcoin slows down ensuring it's value continues to increase with fewer buyers. Proper retirement planning means moving from 100% risky in your 20s to 50/50 in your 40s to 10/90 in your 60s.

cogman10 5y ago

Most currencies have no underlying value. The value of a dollar is drawn from dollar supply and trust that others will accept and value the dollar. When a currency goes through hyperinflation, that generally happens because the government goes crazy printing the currency and the trust that others have in accepting the currency goes down. If crypto collapses, it will likely be because it just becomes computationally infeasible to work with. The problem with the blockchain is that every action on the blockchain requires the whole blockchain. As time goes on simply storing the blockchain will be something that's simply not reasonable. An issue specifically with bitcoin is that as time goes on, transferring a single coin in a day, month, or year becomes computationally impossible. Bitcoin is quickly rushing to a point where holders of bitcoin will be incapable of trading it. That, IMO, will be the collapse of crypto. If you can't move the currency, it doesn't matter how much others value it. It'll become a game of hot potato. with the last few holders getting more and more desperate to unload the potato for money.

brandon272 5y ago
Hyperinflation after money printing is not the result of "trust going down". It's the result of increased dollars increasing aggregate demand in a system that cannot keep up with productive capacity.

dwaite 5y ago

Thats the rub - a currency which you can't actually spend is more of a speculative investment. A currency which you can only exchange for other more stable currencies even more so. When you try to take a digital currency and exchange it for digital items and digital ownership, you do so in a realm where "information wants to be free" - ownership of data is not often as interesting a concept as you want. Finally, when you try to exchange digital currency for physical goods, you start to realize ownership itself only means anything as part of the existing legal constructs - a distributed ledger "title" will only be valid when the government says it is, and a successfully executed smart contract can be effectively overturned by a judge's order. The parties/exchanges that don't acknowledge any of this and push the decentralized, out-of-government-control messaging seem like they are tending to be the ones who are structured corporately to be highly resistant to being taken to court over false claims by their customers/victims.

captainmuon 5y ago

Why, there is value in crypocurrency. Maybe not the kind of value society actually wants. Crypto can be redeemed for drugs on the darknet. And you can use it to launder money, or to dirty money (taking your legitimate income and funneling it anonymously somewhere else). Many cryptocurrencies have been ruled securities. Securities are not "currencies", but still have value, don't they? Even if it is just speculative value (you don't know whether the underlying business is goiong to be successful, or if it is even a scam).