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> One argument seems to be that cryptocurrency is purely speculative, which is apparently a dirty word. What about the stock market? What about any kind of inve

> One argument seems to be that cryptocurrency is purely speculative, which is apparently a dirty word. What about the stock market? What about any kind of investment? Most other assets represent ownership of... something. A company, a commodity, property. Cryptocurrency is closest to either a fiat currency without the government backing that typically tries to stabilize those. Or to more exotic and abstract financial instruments like credit default swaps or shorts. Basically what's missing is the ability to even guess at the "true" value of cryptocurrency. There's no P/E ratios to consider because the only thing Crypto "produces" is Crypto transactions. It's also impossible to even guess at a floor or ceiling for the price of a cryptocurrency. The only thing that determines their price is human sentiment - a very fickle input. Because of this, it's likely that cryptocurrency is vulnerable to market manipulation. Both through large transactions and through marketing. See also: the ample evidence of wash trading in the NFT space. In these kinds of situations my feeling is that if I'm not the one doing the manipulating then I'm the sucker on the other end.

aqme28 5y ago
> Basically what's missing is the ability to even guess at the "true" value of cryptocurrency. There's no P/E ratios to consider because the only thing Crypto "produces" is Crypto transactions. It's also impossible to even guess at a floor or ceiling for the price of a cryptocurrency. The only thing that determines their price is human sentiment - a very fickle input. Interestingly, this isn't really true anymore. Most of the newer defi currencies represent a portion of ownership in some protocol that is actually returning profits. E.g. Maker is a lending platform for DAI. You can borrow DAI by depositing other currencies as collateral. The interest you pay to borrow is then converted by Maker into a sort of "stock buyback" against its Maker token. The Maker token has a P/E ratio, as do many other coins. https://www.tokenterminal.com/ https://www.tokenterminal.com/ To your point though, the P/E ratio for most of these is denominated in other cryptocurrencies, not in USD.
- meragrin_ 5y ago
  > ownership in some protocol But what is the value of the protocol? > actually returning profits Are there actually profits if the protocol is worthless?
  - aqme28 5y ago
    >But what is the value of the protocol? Wish I knew! Investing would be a lot easier. > Are there actually profits if the protocol is worthless? Nope, therefore these protocols are not worthless?
- throwaway4good 5y ago
  Sure, For example crypto.com offers 12% pa. on your USD account. https://crypto.com/eea/earn https://crypto.com/eea/earn P/E just like normal company ...
  - aqme28 5y ago
    What are you talking about? APY on a loan is not P/E.
    - throwaway4good 5y ago
      It is a return. And it is not loan, it is a "stake". An example of the mumbojumbo obvious fraud that is out there. It has nothing to do with a company making money by producing useful products or services that has actual real world value.
      - aqme28 5y ago
        I mostly agree with you, but how does crypto.com's marketing relate to what I was talking about in the parent comment?
      - MisterBastahrd 5y ago
        When you stake, you are using your own money to guarantee that transactions on a network will process successfully. If something happens and they don't, you lose that bag. Staking is just a very stupid loan that you give out without having any real insight into the people who borrowed from you.
    - lupire 5y ago
      They are saying that financially, P/E on a stock (really, E/P) you buy is the same as APY on a deposit/loan, since both are the return on invested capital, and you can cash out your principal later. Oh course their are subtle details that cause volatility and risk of collpase based on how the company/bank/borrower uses the money you put in.
- DerArzt 5y ago
  As a layperson who doesn't know a whole lot about investing, this sounds like a ponzi scheme. The way that I am interpreting this is that if I were to invest in one of these (i.e. Maker) then the returns that I would see are there purely because other people are investing in it. That is close to what most stocks do, but at least with stocks in a company the value is not driven by the mechanism by which it is traded alone, but also by the decisions and profitability that the stocks are backing.
  - aqme28 5y ago
    > The way that I am interpreting this is that if I were to invest in one of these (i.e. Maker) then the returns that I would see are there purely because other people are investing in it. That's the opposite of what I'm saying. The returns are from other people using the platform, not from investors in it. For Maker, using the platform means borrowing. For Uniswap, the returns are from a small % fee on trades. It's exactly analogous to a traditional company.
    - lupire 5y ago
      But what is the platform used for? Converting energy into human comfort, or just another layer of financial engineering?
      - kravens_last 5y ago
        > But what is the platform used for? Converting energy into human comfort, or just another layer of financial engineering? This is essentially the "problem" at heart of all crypto "currencies". There is no real world use case that imparts human value, apart from its utility as a speculative vehicle to grow wealth. Every new DeFi application is a new layer to lock in current adapters who would've otherwise already cashed out. Crypto as a currency is a concept dead in the water because of the perverse incentives of finding every corner of arbitrage between non distinguishable (and frankly worthless) alt tokens/coins. The entire world of crypto is nothing else but an experiment of how much one could financialize a fully non-regulated, intangible, and imaginary "good" based on nothing but greed.
- selestify 5y ago
  > Price to earnings (P/E) ratio. Calculated by dividing the fully-diluted market cap with the annualized protocol revenue. Shows how a project is valued in relation to its protocol revenue. That's misleading. Revenue is not earnings. For something like Uniswap, you also have to look at how much of earnings is given to liquidity providers versus spent on token buybacks.
  - xadhominemx 5y ago
    Plus all the revenue is generated from cryptocurrency trading. It’s all circular.
nightski 5y ago
This is just one person's opinion, but even with PE ratios, profitability, or any financial statement you can read determining the value of a company's stock (not the same as the company itself) is almost as hard as bitcoin. If you can reliably price a stock based on any measure of company value then you could be very rich very fast. There is a reason they say don't stock pick just buy an index fund and hold.
- willturman 5y ago
  A share of stock is a fraction of the cash flow of a company. A share represents a tangible thing which can valued according to any number of mechanisms. Cryptocurrencies represent nothing but transactions and the ledger of those transactions (which they are exceedingly wasteful and clumsy at achieving).
  - nightski 5y ago
    You would be correct if the only thing that drove the price of a stock was current cash flows. What you are leaving out is growth. Stock prices include expected growth of future profits which by no means is a science. Not to mention all kinds of other things can affect a stock price such as global macroeconomic conditions, interest rates, etc...
- mbesto 5y ago
  > If you can reliably price a stock based on any measure of company value then you could be very rich very fast. What you're saying is already true and already is happening. The global financial services industry is a $20T industry. > There is a reason they say don't stock pick just buy an index fund and hold. Yes for the common retail person sure, but someone has to purchase stocks to put them into an index. Those are professionals who evaluate PE ratios, profitability, and financial statements.
  - lowdest 5y ago
    >Yes for the common retail person sure, but someone has to purchase stocks to put them into an index. Those are professionals who evaluate PE ratios, profitability, and financial statements. This is not what an index is. You are describing a fund, but an index fund explicitly does not evaluate PE ratios, profitability, and financial statements, they buy everything in the index according to the market cap. Some proprietary indices are privately curated in the way you describe, but in common use the "index" means all of the companies, rather than a curated subset.
dataangel 5y ago
Satoshi actually had a theory for Bitcoin pricing. He thought it would behave like gold, where over the long run the price converges to the cost of mining it. The cost to run the miners is a floor on the price, because if miners mine unprofitably eventually they go bankrupt.
- SketchySeaBeast 5y ago
  So, assuming it's around that long, what happens in 2140? Infinite value?
  - barnabee 5y ago
    Miners still receive it from transaction fees, so no. Although the economics of keeping the network secure in the face of no new bitcoin being created and many txns happening in side chains or rollups (or not happening at all) are untested.
  - luciusdomitius 5y ago
    Not really. Historically, no global currency since the Byzantine Solidus (whose practical dominance vaned with the Fourth Crusade in 1200-something) has lasted longer than 80-100 years. So, Bitcoin isn't even trying to do so.
    - deleted 5y ago
      [deleted]
- toss1 5y ago
  Hmmm, thinking out loud... That means that the total cost of all the mining divided by the outstanding value of BTC should approximate the floor. Except when it doesn't. When it becomes unprofitable to mine, all of the miners turn off their machines, and the network dies, it'll go to zero. Complicating factor is the miners who have free electricity, e.g., setup hooked up to their own solar farm or natgas flare. For them, the cost of mining is the capital investment over their output, so they'd keep their machines running as marginal cost of new energy is essentially zero, but the employees to keep it running? If we're down to very few mining machines running, how quickly does the difficulty scale downwards — fast enough to keep it running?
sowbug 5y ago
> human sentiment - a very fickle input Ordinary accounting principles already have a concept for this: goodwill. If a business's valuation exceeds the net of its tangible assets minus liabilities, then that intangible asset is called goodwill. Goodwill is neither a strange concept nor inapplicable to virtual currencies/assets. Instagram's value as a business entity (yes, I know it's owned by Meta) clearly exceeds the value of the source code, real estate, office furnishings, accounts receivable, etc. A competitor could duplicate everything Instagram does, but the competitor wouldn't be as valuable as Instagram. That difference in value is goodwill. In the tech industry, where we give new names to old things, we call it network effects. The Instagram network is an intangible asset that has real value, which you can't derive solely from Instagram's tangible assets. That company had to build a product and become extremely lucky that it caught on and became popular. Instagram is valuable because its users think it's valuable. If you aren't an Instagram user, you probably don't see its benefit and might have trouble understanding why it's a $XX billion business entity. Same with successful virtual currencies and assets: they're valuable because of the network effects. Bitcoin is valuable because its users think it's valuable. That's true of any valuable network, and it's true of Bitcoin.
- lupire 5y ago
  Goodwill is an accounting euphism for "losses that haven't been declared yet".
- webmaven 5y ago
  > A competitor could duplicate everything Instagram does, but the competitor wouldn't be as valuable as Instagram. You left out IP other than source code, specifically all the User Generated Content they have.
  - sowbug 5y ago
    Doesn't matter. The competitor could have a (legal) real-time mirror of all the UGC, but no users would interact with it -- they'd give their likes and comments to the real Instagram. Nobody would visit the competitor's app to post new UGC, either -- people post on Instagram for the likes and comments. The value is in the network, not the IP.
dogman144 5y ago
For what it's worth, with an older financial background, the gold standard of P/E ratios were made up at one point as well. Financial statement analysis and GAAP are much softer indicators than gen pop tends to think. It comes out of a period before behavioral economics took hold, for instance. > guess at the "true" value of cryptocurrency How I do it is this: It's understood today that the Internet fundamentally changed "something" inherent about how we access, interact with and move information. There was a cambrian explosion of availability, and we overtime determined there was some form of "value" to it. It's worth remembering that how to value it had no real peer to compare to in terms of competing information networks - would you price an internet company, or infrastructure like you would a book publishing company or news org? That valuation and how to invest in it broadly took the form of Internet companies, or data-rate charges from infrastructure owners. It's challenging to price the actual data in the network. Arguably, PII/customer data is so valuable because that's easy to price. It's tied to a discrete individual. But for raw information packets, that's more challenging to do for many reasons. So we know this information has value, but we can't easily price it like we can other commodities (1 piece of timber == $$, 1 TCP/IP packet == ?). Financial transactions are also a form of information. But they didn't experience a correspondingly large boom relative to the full impact on information by the Internet. This is because financial transactions need to be provably discrete, and TCP/IP and related design concepts aren't a good fit for it (yes, packets in transit are discrete, but what I'm referring to goes beyond that). So, we've seen huge explosions of financial activity where it was a simpler financial tx -> internet packet like in heavily digitized financial exchanges, paypal, venmo, and the large uptick in tap-to-pay smart devices. However, we're still entering payment details manually in many payment settings, and the digitization of current finance still ends up requiring a significant amount of manual settlement behind the scenes. This is because it's challenging to prove that "1 digi-buck" is in fact a discrete digi-buck I own and I alone. So, that's the value that cryptocurrency solved: how to send provably discrete financial data, without relying on a manual, centralized settlement system that's possibly corruptible (what cryptocurrency people would call trustless settlement). It moves the value proposition from the external parties around the internet (ISPs, companies, consumer data) directly into the data transacted, itself. And puts a price on that data. In my mind, I think of what the Internet did to information, and what cryptocurrency does to financial information, then there's a clear value prop. Edit: the big unknown though is how the tradeoffs between a good-enough service like venmo vs. bitcoin impact user decisions. Digitized finance that's just "good enough" might be good enough for quite a large chunk of the population, and it'll be a long time before we see me paying you for beer in btc. Hope that helps but also would love to hear counters.
survirtual 5y ago
For Bitcoin and other PoW coins, the value is built into the name for minting: Proof of WORK. Less abstractly, today we can think of this as proof of energy consumption / production. In other words, it is sort of crystallizing energy into abstract & transmissible value. By holding a coin, you hold that value / solidified energy. It takes a certain and increasing amount of energy to generate 1 coin, which binds the value of the coin to physics. This is actually a very good thing, especially given it does not care where the energy comes from. If nuclear, solar, window, hydro, and thermal were our dominant energy sources, it would work in that just as well and without bias. Indeed, it actually has active market incentives to utilize clean and renewable energy sources — something the previous financial mechanisms grossly lack. Existing banking institutions consume more energy in unmeasurable ways, and they DO care where the energy comes from: oil. They want oil. It’s called the petrodollar for a reason.
- deprave 5y ago
  So I can pay my utility company $100 a month for energy I consume, or pay $40000 for a bitcoin representing energy someone else consumed? Got it.
  - bitxbitxbitcoin 5y ago
    Yes. How many ways do you have to reliably monetize a portion of that $100 that goes to the utility company, though? At its core, proof of work (not Bitcoin's anymore because of ASICs), allows that.
    - lupire 5y ago
      I dont need to monetize it, I can keep the $100 and not buy the energy. And it's not "reliable" if I get rug pulled (extemely common) or someone else has a more effcient mining setup (extremely common). Maybe if I'm stuck on inefficient resistive heatong in winter, mining makes sense.
  - Scoundreller 5y ago
    That’s how much it would take to produce another one. Most cost a much smaller fraction of that.
atlantas 5y ago
To be fair, P/E ratios, financials and stock market regulation didn't prevent this: $PTON (Peloton) is -77% in the past year $ZM (Zoom) -67% $CLOV -82% $HOOD (Robinhood) -70% $ROKU -71% $TWLO (Twilio) -59% $DOCU (Docusign) -52% Bitcoin is -28% over the same time period. Ethereum +51%.
ok123456 5y ago
>P/E ratios to consider because the only thing Crypto "produces" is Crypto transactions The 2008 crash showed that most of those signals are highly manipulated. Bond ratings can be colluded on. Just a few short years later most of the dust settled on that, it happened again with the LIBOR rate. Traditional markets can be systematically manipulated when the fiduciaries don't act in a very fiduciary manner. (It keeps happening!)

aqme28 5y ago

> Basically what's missing is the ability to even guess at the "true" value of cryptocurrency. There's no P/E ratios to consider because the only thing Crypto "produces" is Crypto transactions. It's also impossible to even guess at a floor or ceiling for the price of a cryptocurrency. The only thing that determines their price is human sentiment - a very fickle input. Interestingly, this isn't really true anymore. Most of the newer defi currencies represent a portion of ownership in some protocol that is actually returning profits. E.g. Maker is a lending platform for DAI. You can borrow DAI by depositing other currencies as collateral. The interest you pay to borrow is then converted by Maker into a sort of "stock buyback" against its Maker token. The Maker token has a P/E ratio, as do many other coins. https://www.tokenterminal.com/ https://www.tokenterminal.com/ To your point though, the P/E ratio for most of these is denominated in other cryptocurrencies, not in USD.

meragrin_ 5y ago
> ownership in some protocol But what is the value of the protocol? > actually returning profits Are there actually profits if the protocol is worthless?
- aqme28 5y ago
  >But what is the value of the protocol? Wish I knew! Investing would be a lot easier. > Are there actually profits if the protocol is worthless? Nope, therefore these protocols are not worthless?
throwaway4good 5y ago
Sure, For example crypto.com offers 12% pa. on your USD account. https://crypto.com/eea/earn https://crypto.com/eea/earn P/E just like normal company ...
- aqme28 5y ago
  What are you talking about? APY on a loan is not P/E.
  - throwaway4good 5y ago
    It is a return. And it is not loan, it is a "stake". An example of the mumbojumbo obvious fraud that is out there. It has nothing to do with a company making money by producing useful products or services that has actual real world value.
    - aqme28 5y ago
      I mostly agree with you, but how does crypto.com's marketing relate to what I was talking about in the parent comment?
    - MisterBastahrd 5y ago
      When you stake, you are using your own money to guarantee that transactions on a network will process successfully. If something happens and they don't, you lose that bag. Staking is just a very stupid loan that you give out without having any real insight into the people who borrowed from you.
  - lupire 5y ago
    They are saying that financially, P/E on a stock (really, E/P) you buy is the same as APY on a deposit/loan, since both are the return on invested capital, and you can cash out your principal later. Oh course their are subtle details that cause volatility and risk of collpase based on how the company/bank/borrower uses the money you put in.
DerArzt 5y ago
As a layperson who doesn't know a whole lot about investing, this sounds like a ponzi scheme. The way that I am interpreting this is that if I were to invest in one of these (i.e. Maker) then the returns that I would see are there purely because other people are investing in it. That is close to what most stocks do, but at least with stocks in a company the value is not driven by the mechanism by which it is traded alone, but also by the decisions and profitability that the stocks are backing.
- aqme28 5y ago
  > The way that I am interpreting this is that if I were to invest in one of these (i.e. Maker) then the returns that I would see are there purely because other people are investing in it. That's the opposite of what I'm saying. The returns are from other people using the platform, not from investors in it. For Maker, using the platform means borrowing. For Uniswap, the returns are from a small % fee on trades. It's exactly analogous to a traditional company.
  - lupire 5y ago
    But what is the platform used for? Converting energy into human comfort, or just another layer of financial engineering?
    - kravens_last 5y ago
      > But what is the platform used for? Converting energy into human comfort, or just another layer of financial engineering? This is essentially the "problem" at heart of all crypto "currencies". There is no real world use case that imparts human value, apart from its utility as a speculative vehicle to grow wealth. Every new DeFi application is a new layer to lock in current adapters who would've otherwise already cashed out. Crypto as a currency is a concept dead in the water because of the perverse incentives of finding every corner of arbitrage between non distinguishable (and frankly worthless) alt tokens/coins. The entire world of crypto is nothing else but an experiment of how much one could financialize a fully non-regulated, intangible, and imaginary "good" based on nothing but greed.
selestify 5y ago
> Price to earnings (P/E) ratio. Calculated by dividing the fully-diluted market cap with the annualized protocol revenue. Shows how a project is valued in relation to its protocol revenue. That's misleading. Revenue is not earnings. For something like Uniswap, you also have to look at how much of earnings is given to liquidity providers versus spent on token buybacks.
- xadhominemx 5y ago
  Plus all the revenue is generated from cryptocurrency trading. It’s all circular.

nightski 5y ago

This is just one person's opinion, but even with PE ratios, profitability, or any financial statement you can read determining the value of a company's stock (not the same as the company itself) is almost as hard as bitcoin. If you can reliably price a stock based on any measure of company value then you could be very rich very fast. There is a reason they say don't stock pick just buy an index fund and hold.

willturman 5y ago
A share of stock is a fraction of the cash flow of a company. A share represents a tangible thing which can valued according to any number of mechanisms. Cryptocurrencies represent nothing but transactions and the ledger of those transactions (which they are exceedingly wasteful and clumsy at achieving).
- nightski 5y ago
  You would be correct if the only thing that drove the price of a stock was current cash flows. What you are leaving out is growth. Stock prices include expected growth of future profits which by no means is a science. Not to mention all kinds of other things can affect a stock price such as global macroeconomic conditions, interest rates, etc...
mbesto 5y ago
> If you can reliably price a stock based on any measure of company value then you could be very rich very fast. What you're saying is already true and already is happening. The global financial services industry is a $20T industry. > There is a reason they say don't stock pick just buy an index fund and hold. Yes for the common retail person sure, but someone has to purchase stocks to put them into an index. Those are professionals who evaluate PE ratios, profitability, and financial statements.
- lowdest 5y ago
  >Yes for the common retail person sure, but someone has to purchase stocks to put them into an index. Those are professionals who evaluate PE ratios, profitability, and financial statements. This is not what an index is. You are describing a fund, but an index fund explicitly does not evaluate PE ratios, profitability, and financial statements, they buy everything in the index according to the market cap. Some proprietary indices are privately curated in the way you describe, but in common use the "index" means all of the companies, rather than a curated subset.

dataangel 5y ago

Satoshi actually had a theory for Bitcoin pricing. He thought it would behave like gold, where over the long run the price converges to the cost of mining it. The cost to run the miners is a floor on the price, because if miners mine unprofitably eventually they go bankrupt.

SketchySeaBeast 5y ago
So, assuming it's around that long, what happens in 2140? Infinite value?
- barnabee 5y ago
  Miners still receive it from transaction fees, so no. Although the economics of keeping the network secure in the face of no new bitcoin being created and many txns happening in side chains or rollups (or not happening at all) are untested.
- luciusdomitius 5y ago
  Not really. Historically, no global currency since the Byzantine Solidus (whose practical dominance vaned with the Fourth Crusade in 1200-something) has lasted longer than 80-100 years. So, Bitcoin isn't even trying to do so.
  - deleted 5y ago
    [deleted]
toss1 5y ago
Hmmm, thinking out loud... That means that the total cost of all the mining divided by the outstanding value of BTC should approximate the floor. Except when it doesn't. When it becomes unprofitable to mine, all of the miners turn off their machines, and the network dies, it'll go to zero. Complicating factor is the miners who have free electricity, e.g., setup hooked up to their own solar farm or natgas flare. For them, the cost of mining is the capital investment over their output, so they'd keep their machines running as marginal cost of new energy is essentially zero, but the employees to keep it running? If we're down to very few mining machines running, how quickly does the difficulty scale downwards — fast enough to keep it running?

sowbug 5y ago

> human sentiment - a very fickle input Ordinary accounting principles already have a concept for this: goodwill. If a business's valuation exceeds the net of its tangible assets minus liabilities, then that intangible asset is called goodwill. Goodwill is neither a strange concept nor inapplicable to virtual currencies/assets. Instagram's value as a business entity (yes, I know it's owned by Meta) clearly exceeds the value of the source code, real estate, office furnishings, accounts receivable, etc. A competitor could duplicate everything Instagram does, but the competitor wouldn't be as valuable as Instagram. That difference in value is goodwill. In the tech industry, where we give new names to old things, we call it network effects. The Instagram network is an intangible asset that has real value, which you can't derive solely from Instagram's tangible assets. That company had to build a product and become extremely lucky that it caught on and became popular. Instagram is valuable because its users think it's valuable. If you aren't an Instagram user, you probably don't see its benefit and might have trouble understanding why it's a $XX billion business entity. Same with successful virtual currencies and assets: they're valuable because of the network effects. Bitcoin is valuable because its users think it's valuable. That's true of any valuable network, and it's true of Bitcoin.

lupire 5y ago
Goodwill is an accounting euphism for "losses that haven't been declared yet".
webmaven 5y ago
> A competitor could duplicate everything Instagram does, but the competitor wouldn't be as valuable as Instagram. You left out IP other than source code, specifically all the User Generated Content they have.
- sowbug 5y ago
  Doesn't matter. The competitor could have a (legal) real-time mirror of all the UGC, but no users would interact with it -- they'd give their likes and comments to the real Instagram. Nobody would visit the competitor's app to post new UGC, either -- people post on Instagram for the likes and comments. The value is in the network, not the IP.

dogman144 5y ago

For what it's worth, with an older financial background, the gold standard of P/E ratios were made up at one point as well. Financial statement analysis and GAAP are much softer indicators than gen pop tends to think. It comes out of a period before behavioral economics took hold, for instance. > guess at the "true" value of cryptocurrency How I do it is this: It's understood today that the Internet fundamentally changed "something" inherent about how we access, interact with and move information. There was a cambrian explosion of availability, and we overtime determined there was some form of "value" to it. It's worth remembering that how to value it had no real peer to compare to in terms of competing information networks - would you price an internet company, or infrastructure like you would a book publishing company or news org? That valuation and how to invest in it broadly took the form of Internet companies, or data-rate charges from infrastructure owners. It's challenging to price the actual data in the network. Arguably, PII/customer data is so valuable because that's easy to price. It's tied to a discrete individual. But for raw information packets, that's more challenging to do for many reasons. So we know this information has value, but we can't easily price it like we can other commodities (1 piece of timber == $$, 1 TCP/IP packet == ?). Financial transactions are also a form of information. But they didn't experience a correspondingly large boom relative to the full impact on information by the Internet. This is because financial transactions need to be provably discrete, and TCP/IP and related design concepts aren't a good fit for it (yes, packets in transit are discrete, but what I'm referring to goes beyond that). So, we've seen huge explosions of financial activity where it was a simpler financial tx -> internet packet like in heavily digitized financial exchanges, paypal, venmo, and the large uptick in tap-to-pay smart devices. However, we're still entering payment details manually in many payment settings, and the digitization of current finance still ends up requiring a significant amount of manual settlement behind the scenes. This is because it's challenging to prove that "1 digi-buck" is in fact a discrete digi-buck I own and I alone. So, that's the value that cryptocurrency solved: how to send provably discrete financial data, without relying on a manual, centralized settlement system that's possibly corruptible (what cryptocurrency people would call trustless settlement). It moves the value proposition from the external parties around the internet (ISPs, companies, consumer data) directly into the data transacted, itself. And puts a price on that data. In my mind, I think of what the Internet did to information, and what cryptocurrency does to financial information, then there's a clear value prop. Edit: the big unknown though is how the tradeoffs between a good-enough service like venmo vs. bitcoin impact user decisions. Digitized finance that's just "good enough" might be good enough for quite a large chunk of the population, and it'll be a long time before we see me paying you for beer in btc. Hope that helps but also would love to hear counters.

survirtual 5y ago

For Bitcoin and other PoW coins, the value is built into the name for minting: Proof of WORK. Less abstractly, today we can think of this as proof of energy consumption / production. In other words, it is sort of crystallizing energy into abstract & transmissible value. By holding a coin, you hold that value / solidified energy. It takes a certain and increasing amount of energy to generate 1 coin, which binds the value of the coin to physics. This is actually a very good thing, especially given it does not care where the energy comes from. If nuclear, solar, window, hydro, and thermal were our dominant energy sources, it would work in that just as well and without bias. Indeed, it actually has active market incentives to utilize clean and renewable energy sources — something the previous financial mechanisms grossly lack. Existing banking institutions consume more energy in unmeasurable ways, and they DO care where the energy comes from: oil. They want oil. It’s called the petrodollar for a reason.

deprave 5y ago
So I can pay my utility company $100 a month for energy I consume, or pay $40000 for a bitcoin representing energy someone else consumed? Got it.
- bitxbitxbitcoin 5y ago
  Yes. How many ways do you have to reliably monetize a portion of that $100 that goes to the utility company, though? At its core, proof of work (not Bitcoin's anymore because of ASICs), allows that.
  - lupire 5y ago
    I dont need to monetize it, I can keep the $100 and not buy the energy. And it's not "reliable" if I get rug pulled (extemely common) or someone else has a more effcient mining setup (extremely common). Maybe if I'm stuck on inefficient resistive heatong in winter, mining makes sense.
- Scoundreller 5y ago
  That’s how much it would take to produce another one. Most cost a much smaller fraction of that.

atlantas 5y ago

To be fair, P/E ratios, financials and stock market regulation didn't prevent this: $PTON (Peloton) is -77% in the past year $ZM (Zoom) -67% $CLOV -82% $HOOD (Robinhood) -70% $ROKU -71% $TWLO (Twilio) -59% $DOCU (Docusign) -52% Bitcoin is -28% over the same time period. Ethereum +51%.

ok123456 5y ago

>P/E ratios to consider because the only thing Crypto "produces" is Crypto transactions The 2008 crash showed that most of those signals are highly manipulated. Bond ratings can be colluded on. Just a few short years later most of the dust settled on that, it happened again with the LIBOR rate. Traditional markets can be systematically manipulated when the fiduciaries don't act in a very fiduciary manner. (It keeps happening!)