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Crypto is an unproductive bubble
- newacc9 5y agoBitcoin only has to be better than your local fiat currency, which isn't a very high bar. https://twitter.com/MichaelAArouet/status/1472128633074597889 https://twitter.com/MichaelAArouet/status/147212863307459788...
- tootie 5y agoBitcoin is vastly worse than fiat. Like orders of magnitude. Bitcoin at this point isn't even currency. If it were, it would be in a cataclysmic deflationary spiral. Instead it's an investment vehicle. One backed by absolutely nothing. The Bitcoin market is 100% rents and 0% utility. Arguably negative utility because of the massive climate costs involved in mining. On the flip side, central banks managed to dig us out both a financial disaster and a pandemic and only now seeing inflation nudged a bit high. Fiat has massively outperformed crypto.
- newacc9 5y agoNo one keeps money in fiat. It goes into stocks, real estate, etc. Because fiat is going to zero.
- tootie 5y agoFiat inflates by design. It is very specifically intended to never be an investment. It is meant to be spent or invested in equity and interest-bearing securities. Deflating currency is never spent. Hence, Bitcoin is not currency and comparisons to fiat are not meaningful.
- randomhodler84 5y agoI feel like you live in an imaginary world where the data doesn’t fit reality: https://usdsat.com/ https://usdsat.com/ Fiat is going to ZERO. All fiat currencies. I’d you fail to see the utility now at year 13, I hope you will not let another 13y pass.
- tootie 5y agoZero what? Zero purchasing power? No, it is not.
- newacc9 5y agoTalk to any 70 year old, they'll say $100 was a lot of money in those days. At 7 pct inflation your pp will get cut in half in 10 years, but im being pedantic since this is obvious to everyone.
- nikanj 5y agoWith BTC your purchasing power can get cut in half overnight
- tootie 5y agoSo what? That is, like I said, 100% by design. In order for currency to be useful as a currency, it should inflate gradually. We're slightly high right now and were even higher for a while 40 years ago, but in neither case has the system broken. Sellers and employers know what to expect and how to pace prices and wages in a sensible way to keep pace. When the system starts to buckle, policy makers have mechanisms to fix it and they have. Bitcoin fluctuates wildly and its price is 100% speculative. It is neither backed by commodities (ie gold standard), by promise of dividend, by equity, nor by the "full faith and credit" of a nation. It's pure supply and demand where supply is arbitrary and demand is 100% elastic and could drop to zero at any time for any reason. Consider the recent pandemic where GDP contracted at an apocalyptic rate for a few quarters and yet policy makers were able to bail out both employers and workers with the help of massive fiat monetary assistance. Poverty actually decreased in the US during the pandemic. What would that 70 year old say if they bought a house 10 years ago for 400 BTC and solid it today for 5? On the flip side, someone working for BTC 10 years ago might have expected a salary 50 BTC a year and someone being hired today might be 1 BTC a year. Is that a better situation? While the price per coin skyrockets, the only sensible position is to hoard it and never spend or invest anything. That would be a disaster.
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- caidehen 5y agoCrypto is useless outside black market, illegal activities. I can't find any use cases which money issued by gov can't cover but crypto can. Basically it's an re-invented wheel, like so many new programming languages which are interesting but not necessary.
- ecocentrik 5y agoCrypto fails a few key platform viability indicators. New and exciting platforms tend to attract business creators that create outward facing services at a rate that is significantly higher than crypto ever has. It's fairly telling how few truly clever people will go anywhere near crypto for any reason other than quick value extraction. The art sales market looks like engineered market depth with a slice of window dressing. I'd love to see how artists give up on the platform over the course of the bear market. It seems like most already have.
- wrnr 5y agoThe opposite is true of the metaverse in my opinion, it is stupid gimmick that puts form over function and all that, but computer graphics is still a very rewarding field with a lot of useful technologies ranging from GPU programming to game design.
- woodruffw 5y ago> Claim 2: Blockchain technology has no non-monetary applications Even beyond this: there don't seem to be that many non-speculative monetary applications of cryptocurrencies and distributed ledgers. The few that do exist seem to exist primarily in conjunction with the demand for liquidity in speculative applications.
- cwkoss 5y agothat's just like, your opinion, man
- seibelj 5y agoCounter point - art itself has absolutely zero non-monetary applications. If you disagree, then you must admit NFTs can be appreciated as art. If so, the argument of the OP is refuted. If you think art can be appreciated without being an NFT, then why pay any amount of money for any physical art when a super high resolution PNG does the same thing?
- whateveracct 5y agoThe NFT art is art. The NFT itself isn't - it's in fact just a .. wait for it now .....financial tool to monetize said art. got 'em
- mirntyfirty 5y agoI see NFT as an alias to a file.
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- elil17 5y agoAnyone whose been to a museum knows that super high resolution images are not the same as art. They have a limit amount of color information, can’t be displayed in the same way unless you print them (which is difficult to do well), and don’t have any 3d features (like brush strokes). That said, people are willing to pay irrationally large amounts of money for art for pretty similar reasons to why they pay money for NFTs.
- woodruffw 5y ago> If you disagree, then you must admit NFTs can be appreciated as art. If so, the argument of the OP is refuted. This seems to be an object/reference mistake: NFTs (as we've been repeatedly told) are tokenizations of an asset, not the asset itself. You can tokenize anything, so of course there exist things represented by NFTs that are themselves are. But NFTs themselves? They're not art, at least not until the Andy Warhol of SHA256 shows up.
- daenz 5y agoI have a hard time imagining how your normal everyday people would put any faith whatsoever in crypto. It's another step removed from "just a bunch of numbers in an account" (current banking) that is even harder to explain and justify. Why should they trust it? So how can it succeed if everyday people don't want to use it?
- Ekaros 5y agoAt least with current numbers on account there is multiple governments involved trying to keep the value pretty stable overall. As that is best alternative in general for their politicians to continue staying in power. And other options are probably worse... Modern monetary policies whatever they are exist for reason, things would likely be worse without them. And the big cryptos have no monetary tools...
- charcircuit 5y ago>And the big cryptos have no monetary tools... Dai
- exolymph 5y agoFlip it. Why should they trust anything else? They don't, so crypto being untrustworthy doesn't particularly stand out from the stock market, where you can also easily fuck up and lose your shirt without ever quite understanding what you've gotten into. See: options.
- paxys 5y agoWhile I agree with 2 and mostly agree with 3, I don't see how anyone can say "crypto is a bubble" with high confidence. Even if it is a 100% speculative investment with no real world use, that doesn't automatically make it a bubble. There are plenty of similar investment classes that have persisted through the ages and society has deemed perfectly valid – gold, art, precious gems, trading cards, virtual hats...I'm sure one or more cryptocurrencies can have a similar long term life as a store of value.
- nly 5y agoMost of the other things you mentioned are collectibles. They're either rare, non-fungible or completely one-of-a-kind and therefore fought over in the niche markets in which they trade. Gold is a commodity with genuine industrial uses, and ingrained appeal to humans through thousands of years of being adorned and traded as jewelry. Sure, it's been diminished, we have so many materials now that can be used industrially and fashioned in to shiny trinkets, but comparing it to a completely synthetic, abstract instrument like Bitcoin is a bit disingenuous. I definitely think there's room in the world for a completely decentralised peer to peer digital cash equivalent, but I think it remains to be seen how valuable everyday people in this world consider this utility.
- paxys 5y agoThat is circular reasoning. Bitcoin is also a collectable, with a fixed number of them (21 million) out there to collect. Every investment we are talking about is only rare because the community that participates in it has decided they are rare. Otherwise there is nothing stopping me from taking a picture of a piece of art or trading card and reproducing it a million times.
- kweingar 5y ago> Bitcoin is also a collectable, with a fixed number of them (21 million) out there to collect. Bitcoin is fungible, unlike collectibles. There is no value to holding one bitcoin vs another, if "different bitcoins" even makes sense as a concept. It can also be subdivided, so it is more accurate to say that there are 21 trillion units that will be out there.
- jmyeet 5y agoI couldn't agree more. It is the ultimate solution looking for a problem. What's funny is watching the crypto world relearn all the lessons that went into making the current financial system the way it is. Example: printing money aka managing the money supply. This is a feature not a bug. At least for a currency. Side note: let's stop calling these cryptocurrencies. They're crypt-assets. It makes me wonder if th Great Filter responsible for the Fermi Paradox is civilizations boiling their planets alive mining crypto before they ever establish a presence in space.
- upsidesinclude 5y ago
- natalyarostova 5y ago
- chizhik-pyzhik 5y agoThe following things can both be true: - a technology that solves coordination among untrusted parties can be useful - the early usecases for blockchains are mostly profiteering and rent-seeking
- acjohnson55 5y agoThe problem is we may have already seen all of the most interesting applications, and they're just not that impressive. Almost everything that's gotten any amount of buzz in the smart contract blockchain world was predicted in the Ethereum whitepaper. It may have just been a remarkably impressive dredging of nearly everything of value in a small pond.
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- mudlus 5y agoClaim 1: bubbles are natural, that doesn't mean that underlying solutions are wrong, just that not all speculators are right or understand the problems being solved. Claim 2: Google 'Bitcoin Spacechains' Claim 3: On a long enough time scale all discoveries are minor, this is what it means to always be optimistically solving problems at the beginning of infinity.
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- asasidh 5y ago"Crypto" is just another name for scams and money grab shitcoins. Bitcoin is a tool for freedom.
- jmcgough 5y agoOne of the biggest drawbacks for blockchain is that transactions can't be revoked after the fact (with the only exception being costly forks of the entire ledger), and there's no additional human oversight (like I'd get when sending a large amount of money through a bank) to protect me. If someone steals my credit card, I have my credit card company to give me some level of protection. They can block transactions if they think it's stolen, and if I report it as stolen I can claw back money from fraudulent purchases. If I purchase something and don't get what I paid for, I can contest it with customer service or my credit card company. With crypto, a software flaw used to steal crypto can kill an entire company. They're largely powerless to stop it once the transaction has gone through. With crypto, a xss attack or a misplaced password can cost me all of my coins. With crypto, I have to triple check the address I'm sending coins to because I can't undo it. With crypto, I have to spend what's sometimes a significant amount of money just to complete a transaction, and transactions can take minutes or hours to complete. I think there's a future in crypto but we're in the dotcom boom days of it where most of the value is in speculation (and I suppose illegal purchases on the darknet). I'll wait for crypto 2.0.
- charcircuit 5y agoThe same flaw applies to cash. If you give someone $5 there is no way to revoke that transaction. You only can ask them to make a new transaction and give you the $5 back. Just like how additional layers were built on top of cash,new layers will be built on top of cryptocurrencies leading way to the "crypto 2.0" you are waiting for.
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- anonporridge 5y agoOr gold. Or any other property. Bitcoin is simply digital property. And like real world property, you can mess up and lose it irrevocably. If you give your gold to the wrong person or drop it to the bottom of the sea, you're probably not getting it back. If you under fund your military, and someone else comes in and takes control of your land, you're probably not getting it back. If you send your bitcoin to the wrong address, or mismanage your private keys such that they are stolen, you're probably not getting it back.
- henvic 5y ago> Fiat currencies administered by competent central bankers have the attractive feature that their governance can be used as a tool to cool excesses and calm panics when the credit cycle goes through its inevitable revolutions. No. Gold standard has none of the properties you told. Fiat currency is a disaster and evil. Besides, it's also likely the only reason why cryptocurrency is drawing attention to anyone. https://henvic.dev/posts/bitcoin/ https://henvic.dev/posts/bitcoin/
- lvs 5y ago
- jka 5y agoCryptocurrencies and web3 demonstrate promise as ways to escape from the VC-funded walled gardens that are more typical of previous eras of the web. Ironically that means that excessive amounts of money are being thrown at them in order to obtain any kind of small angular velocity towards funders that believe they can capture the next generation of the market -- or simply to prevent it from happening, for those with existing moats. Simply wait. Give it another five years to a decade or so and the tide will recede and the valuable technology will remain above the silt.
- pornel 5y agoYou’re merely replacing old masters with new. There’s a ton of VC money flowing into “web3”, because they’re replaying the same game of adding a service on top of an open protocol to capture and centralize it.
- jka 5y agoI think they're the old masters and they want to become the new ones over a larger landscape. They know the "limitations" of the existing model (the ways in which it is not centralized) -- as do many others -- but they want to lay a claim to some of the solution. To do so requires twisting reality in ways that involve huge sums of money to create distortion fields.
- fmvab 5y agoAnother point I’d add: isn’t it telling that we haven’t come up with use cases for crypto that aren’t in some way speculation in the last decade plus?
- gfodor 5y agoCrypto enables illicit transactions.
- lern_too_spel 5y agoOnly because they haven't yet been regulated. That has already changed in China and is about to change in the US. Then that use case goes away.
- gfodor 5y agoMaybe, maybe not. Certainly some people who are doing this will continue to do so despite regulation. In any case disproves the comment I was replying to.
- Jommi 5y agoI mean this argument falls apart easily on the debate about use cases for crypto. I'd stay away from making statements like this without backing them up.
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- acjohnson55 5y ago> Claim 2: Blockchain technology has no non-monetary applications (Confidence: High) I would replace "non-monetery" with "non-financial". I think it's a perfectly reasonable (albeit, imperfect) solution as a ledger and exchange mechanism for new financial assets.
- mlyle 5y agoWhat about just non-repudiation? Proving a logfile, or evidence, etc, is from before a certain date and hasn't been tampered with?
- acjohnson55 5y agoSure, that makes sense to me. Is that being done to a meaningful extent?
- propter_hoc 5y agoFor any document in the form of PDF files, this is fairly trivially done using a certified PDF signed by a member of the Adobe Approved Trust List. Other data could be signed by PGP from an issuer that publicizes its public key. In practically every use case there exist trusted parties, obviating the value of decentralized certification.
- kolchinski 5y agoAuthor here, thanks – great point. Mind leaving it as a comment on the essay itself as well for posterity? Or I'm happy to add a footnote/comment quoting you.
- acjohnson55 5y agoJust saw this. I'm trying to post a more substantive version of this comment to your blog, but for some reason, it keeps erroring.
- DennisP 5y agoRegarding the "inefficiency" point, the combination of zkrollups and sharding should reduce costs dramatically on Ethereum. Rollups without sharding are already doing it to some extent.
- benreesman 5y agoHow many times are we going to have this conversation? Yes crypto is an asset bubble, alongside equities, real estate, precious metals, you name it. Money printer go brrrr, more dollars are chasing the same amount of Apple sells iPhones. Crypto has no intrinsic value, it pays no dividend and doesn’t give you proxy rights, just like all the tech equities. Proof of work burns a lot of electricity, though this is complicated because it drives up demand for renewables. I also wish I had bought BTC when it was like a basis point, and if I had I’d be a booster instead of a skeptic, like everyone else. Can we go back to arguing about Rust vs C? This horse has been flogged into quarks at this point.
- Aunche 5y ago>Crypto has no intrinsic value, it pays no dividend and doesn’t give you proxy rights, just like all the tech equities. Tech companies return money to their investors via buybacks. Most investors prefer this as they get to choose when they get taxed.
- NaturalPhallacy 5y agoUnless they go under, then the money is just gone.
- benreesman 5y agoSome do, Apple is notable for this. If Uber’s done one I missed it. FTX burns FTT when they have a good quarter, with roughly the same zero accountability to do so as a FAANG with a God Emperor CEO running a dual-class share structure. Neither of these things are backed by guys with guns who come to your house if you fail to pay taxes in them.
- Aunche 5y agoA failing business is still a business. 60% of new restaurants fail within a year, but nobody would argue that these restaurants have no intrinsic value. Likewise, Uber has facilitated billions of rides.
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- RichardHeart 5y ago1. Everything is a bubble. 2. Censorship resistance is the blockchains only real use case, and more important than ever. (Not hyperbole, since we have all time high population and cancel culture.) 3. Crypto is going no where but up. All fiat currencies go to 0 over time, the opposite of the cryptocurrency total market cap chart. I accept down arrow fate.
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- andrewmcwatters 5y agoI seriously wonder if you can create a digital currency that can effectively be anything other than commodity money. That is, I don't know if you can truly create a logical, mechanical system that permits all of the following: the creation of a fiat currency, the allowance of credit and debt, an autonomous system that cannot be controlled by actors like central banks, and transactional privacy. I believe some of these things are in direct contradiction to each other and there just isn't exactly a wide amount of academic discussion going on about it that I've been exposed to. And what's interesting to me is that if you did effectively create such a system, how would it manifest in usage? If there isn't a digital gold rush, or a speculative aspect to its consumption, well ran monetary systems from established governments give you few reasons to utilize it.
- SubiculumCode 5y agoClaim 1: Crypto is a Bubble (Confidence: High) Sure. All tech rushes go through a bubble. Claim 2: Blockchain technology has no non-monetary applications (Confidence: High) Gambling is definitely a non-monetary application of smart contracts and oracles that is truly viable as a product. *Claim 3: Future monetary use of blockchain technology will be minor (Confidence: Medium) There are many forms of crypto, and many are not immutable. Many have systems of governance that allow for changes in monetary policy, just like in a fiat currency.
- javchz 5y agoOne of my big issues with (legit) Crypto it's UX VS Decentralization. The easiest way for the regular Joe to use crypto it's with an exchange... that it's basically, just a centralized institution making changes in a private database for when transactions are made inside the exchange. Only if the user wants to send money to a wallet the transaction enters into the blockchain, outside of that it's like a bank... without the regulation benefits. I think the state of Crypto right now it's in similar to what HTML journals were at the start of the internet. The reason why social media won over everyone having their blog in a distributed network, was in big part to the easy-to-use experience. I find it a little bit hard to believe that crypto will not be centralized at the end to some extent. This motto of "crypto it's a fight of the common folks against the big guy" feels like marketing made by people who control crypto now and who want to be the "big guy" this time, rather than the democratization of the banking system. Look, I like concepts of the tech behind it and I hope to be wrong, crypto has proven useful in some scenarios like Venezuela. But seem naive to expect that, if they don't take into account the limitations of the tech itself, everyone it's going to use wallets and private keys with all the good security practices requires and never make a mistake.
- alexb_ 5y agoIt's the exact same problem with Email. Email is "decentralized" but most people would rather use a central website and give up their info.
- javchz 5y agoI'm sad you're right, having your own email server right now it's almost impossible thanks to the adviratry rules for SPAM. You have to hire a IT specialist full time only for that, and it's not warranty your emails won't get flagged as a false-positive. We're almost forced to get Google Workspace / Microsoft equivalente Service for your own email.
- karmafish 5y agoI used to have many of these same biases, before I actually used crypto. First off, it is factually incorrect to say that transaction costs are higher than traditional banking. In fact, costs on some blockchains are negligible when compared to traditional banking fees -- literally fractions of a cent for moving large sums of money. Moreover, it is very liberating to be free of banks, with all of their absurd controls, endless gouging, and inconvenience. Admittedly, in the beginning, it is somewhat scary to trust blockchains, but one gets over that fear very quickly and apps and services keep improving to make it easier and safer. It's not ready for grandma yet, but grandma may have a hard time with her normal bank app right now anyways. Furthermore, blockchain based Web 3.0 technology with a wallet that automatically recognizes your account without having to ever enter a password or username actually solves a big problem and greatly improves the experience on most websites. We can debate the philosophical merits of decentralization versus centralization of financial systems until the cows come home, but for me, the benefits of decentralization outweigh the costs. Without getting into too much detail, the main ones for me are: Freedom over my money. Protection from inflation (since some coins limit supply). Transparency of markets (all transactions are public on the blockchain). Also, I believe that for most governments there are real benefits to using crypto. After all, the transparency of public transactions facilitates taxation and the implementation of policy. In the long term, it should actually help to curb money laundering, rather than facilitate it. It is very easy to corrupt a banker. It is near impossible to corrupt the blockchain data. Also, in our complex financial system, blockchains and smart contracts can also unlock a lot of value that is currently trapped in our legal, administrative, and bureaucratic systems. Just solving the problem of custody of financial instruments, would unlock incredible value in the economy. With regards to centralization, I suspect that the real argument that this author is trying to make -- and it really shows his bias -- is that the US should not/won't allow crypto to really gain mass adoption because it threatens its hegemony (the petro-dollar, World bank, dollar as the world's store of value, etc.). The author ignores that for a lot of the world, solving inflation is a much bigger problem than maintaining central bank control. He assumes that US influence/control over world economics/affairs is a good thing. I'm American, but I don't buy that argument at all. It is manifestly unfair and illigical to ask the world to use the dollar as a store if value and then print trillions of dollars whenever banks or other bad economic actors crash the US economy. Think also of the damage that the petro-dollar has caused the environment, delaying the onset of renewable energy while even facing global catastrophe. These are just some thoughts off the top of my head. Lastly, I want to add that for me the most exciting thing about blockchain technology is the disruption and innovation that it will cause in many industries. NFTs are a great example, but just one. Defi is another. There is massive innovation going on right now in defi. New models for lending, raising capital, etc etc. Models that could probably never work with centralized control and current transaction technology. Granted it's something of a totalky deregulated Wild West right now, but there will be winners who may become (in size, hopefully not in spirit) the Amazons and Bank of Americas of tomorrow.
- stephc_int13 5y agoA genuine question from someone with very little financial education. Is there a market to short crypto?
- ThomPete 5y agoEverything is a bubble. Crypto is no different, but its not more a bubble than web2, web1, telnet and we could go on. Its interesting why people are so interested in trying to argue against crypto. Its here, its adding value, get over it.
- city41 5y agoWhat value is it adding? That's a genuine question. As far as I'm able to tell actually using crypto as a currency seems to almost never happen.
- krapp 5y ago>Everything is a bubble. Crypto is no different, but its not more a bubble than web2, web1, telnet and we could go on. Tell me you don't know what a bubble is without telling me you don't know what a bubble is.
- ThomPete 5y agotell me you have a very simplistic idea of a bubble without telling meyou have a simplistic view.
- alexashka 5y ago> Everything is a bubble No.
- MaxMoney 5y ago
- baby 5y agoI'll refute the points > Claim 1: Crypto is a Bubble (Confidence: High) Are stablecoins not crypto? The DeFi built on top of stablecoins and other assets is basically what the market/banks had been doing for a long time (except that everything is transparent, fraud is easier to detect, etc.) > Claim 2: Blockchain technology has no non-monetary applications (Confidence: High) This one is easy to refute. A few ways: 1. The point of cryptocurrencies, is that we found that we could use monetary incentives to build and run services that have nothing to do with money. Sure bitcoin was only for transfers, but other projects have explored how to build services on top: smart contracts, identity registry, archiving of the web, file storage as a service, a tor-like mixnetworks, and I'm sure others can point out all sorts of projects. 2. The core of blockchain technology (although not all of it, see next point) is about protocols for distributed systems when faults can be malicious. Distributed systems are used EVERYWHERE, think distributed databases. As threat models are different for every products, why claim that we don't need distributed databases resistant to malicious faults? Banks are the first target of such products, so it's no wonder that cryptocurrencies were invented. Another example is the web PKI, which currently uses protocols like Certificate Transparency which are good are letting you audit your domain names and detect if any attacks have happened after the fact. I bet you that in the next 10-20 years the web PKI will run on a BFT consensus protocol, or an unknown breakthrough solving a similar problem, to prevent attacks from happening, period. And if nobody builds it I will. 3. What is blockchain tech exactly? Because I can tell you that many fields in cryptography have seen INSANE advances SOLELY because of cryptocurrencies: general-purpose zero knowledge proofs, multi-party computation (and threshold cryptography), broadcast protocols, etc. > Claim 3: Future monetary use of blockchain technology will be minor (Confidence: Medium) That really depends on regulations, and if they want to kill the beast (and replace it with a non-fault tolerant CBDC). But we're already seeing countries adopting cryptocurrencies (albeit the wrong ones) so I guess it depends on where you'll be in the world. The dream of crypto is really, no matter bitcoin maximalists will tell you, to make payments as easy as sending an email. And without an open standard that everyone can trust, how will this ever happen?
- fsociety999 5y agoCongratulations. You knew exactly what to write to make it to the top of Hacker News. Sadly, it doesn’t take a whole lot of original thought these days. Just repeat the establishment talking points that crypto is a bubble and will be worth zero someday, and you will be blessed with hundreds of upvotes. This is echo-chamber, groupthink at its best. You are, of course, free to believe whatever you like, but the way you write about it comes off a bit arrogant and smug. People have been making similar claims about Bitcoin for over a decade now, and meanwhile it is still alive and kicking and shows no signs of slowing down. It is especially useful in places in the world that don’t have easy access to banking and countries where their currencies are being debased. I encourage you to watch this video if you have any interest in challenging your beliefs: https://youtu.be/1rbu32PO5jY https://youtu.be/1rbu32PO5jY You shrug crypto off as not being “genuinely innovative” which I think shows a big lack of understanding. Personally, I think the invention of Bitcoin is perhaps the greatest innovation since the internet itself. It cannot be understated how powerful it is to create money whose supply cannot be controlled by a central institution or power. This is the kind of invention that could literally change the world (and likely will). Your second point in claim 3 is the exact talking point used by the Federal Reserve and other central banks. I think this represents an extremely narrow view of the world. Look at the US dollar which is dangerously on the verge of falling into an inflationary spiral. If you feel safe keeping your money in dollars then godspeed. I personally feel very unsafe given the current political climate. The dollar has lost over 99% of its purchasing power since the creation of the Federal Reserve and the current strategy of printing more money to solve every problem has been much more of a “detriment to people’s lives and livelihoods” than the gold standard ever was. You should research The Cantillon effect which seems to be more and more relevant in today’s economy. An alternative to the boom and bust narrative is that the banking elites of that time period created the boom and bust cycles themselves through control of the gold supply in order to lobby and justify the creation of a central banking system that would benefit them and ensure that if they ever got into a pinch they could bail themselves out by having easy access to the money spigot. Remember history is told by the victors. I agree with you that governments are unlikely to let go of control over monetary policy and won’t do it willingly or eagerly, but I think it is already too late for them to kill Bitcoin. They can cut off exchange access to buy and sell for dollars, but by forcing people to use dollars and cutting off access to crypto, I think it will actually expedite people’s willingness and acceptance of crypto. People and businesses will start accepting crypto directly for payments. It will take a long time for this to actually materialize in the real world because there are so many people like you who have such a narrow-minded view of crypto, but when you are faced with accepting a currency that is losing 10-20% of its purchasing power every year, or accepting Bitcoin, eventually people will understand that Bitcoin is the better money. I expect to receive an onslaught of downvotes for this reply and going against the grain, but so be it.
- Nextgrid 5y agoCryptocurrencies have a valid but very specific use-case: being able to transact in a hostile environment. It does so by making certain trade-offs such as an energy-intensive verification process. This is a very valid use-case when you need to transact against the will of a powerful adversary such as governments. It needs to be there and needs to be protected just like free speech needs to be protected. However, day-to-day, if you're making transactions that the government approves of, it's better and more convenient to rely on said government to protect you and end up using a much more efficient (in terms of transactions per second, fees & energy usage) and convenient system such as credit cards. Crypto is like a tank - useful if you need to go into battle and defend yourself, and while it can be used to go buy groceries at the mall, it's not the most convenient. When you're not in battle, you're better off just using a normal car and relying on local laws and subsequent enforcement to deter anyone from harming you, which, at least in civilized countries, works the majority of the time.
- callamdelaney 5y agoIt’s 2022 - nobody cares about free speech or freedom.
- OrlandoHakim 5y agoIn 2022 some may also care about a truly scarce digital store of value in a time of unprecedented inflation. Speaking about Bitcoin, not altcoins.
- aeternum 5y agoI care
- tormock 5y agoyou forgot privacy... (i.e.: Monero, Zcash, etc)
- roenxi 5y agoAlso, note that "take their stuff through extra-legal means" has become an uncomfortably common strategy in the west. Things like asset forfeiture, debanking in a myriad of forms, increased government intervention in financial systems, changing the rules suddenly every time a totally forseeable at some point financial crisis comes up (there is one every 10-15 years! they aren't surprises). It is completely reasonable to have some assets that the government cannot take away from you without actually going through the court process, putting the screws to someone and arguing to a judge that a crime took place. And that inflates in a predictable, controlled manner. The last 3 years has convinced me that I will own crypto by the time I die. Not bitcoin - indeed, I don't know what protocol it will be yet. But something.
- a-dub 5y agoi think that maybe it will find a home in internet governance. using it as a native currency for internet assigned names, numbers and identities could make a ton of sense. as far as web3, i suspect that will be a few things. a move away from centralized platform economics and/or a rise in applied cryptography made accessible to ordinary business software developers. so maybe a disruption of the venture capital buying out industries and replacing them big singleton companies with web/mobile interfaces business model and hopefully bigger advances in things like end to end encryption for all areas where modern technology has revamped how we conduct business. if we're lucky, we'll see actually secure operating systems as well. to play my own devil's advocate: it could end up replacing a lot of finance, if only for the reason that it seems to attract a lot of the brightest minds in that space, and sometimes that's all you need.
- rufusroflpunch 5y agoThere’s a lot to disagree with here. I don’t want to argue it all, but regarding Bitcoin efficiency, the Lightning network directly resolves this issue. It’s more efficient and cheap than current payment networks like Visa, but still has the same security and permissionless guarantees as the base chain. Not to mention it adds major improvements regarding privacy. Lightning is an engineering marvel.
- hestefisk 5y agoDLT has an interesting application outside of crypto, namely in multi-party environments where a consortium of actors with low level of trust have to transact. Documentary trade finance is a good example. “Corda”, a consortium of financial institutions, have worked together on standardising this.
- binwiederhier 5y agoI opened this link and was hoping for a conversation about how cryptography (not cryptocurrencies) has not made significant advancements in user experience. Not that the article wasn't interesting, but I've long felt that while crypto-primitives advance, the UX of cryptography APIs is still poor across all languages: It's hard to not screw things up, it's hard to understand for newcomers, and there is poor interoperability and no real common encryption file format (maybe gpg, but that's too complex and not widely adopted in popular tools). This was really off topic. My apologies for that, but I feel like I had to get that off my chest :-)
- epa 5y agoPeople are so short sighted.
- paulpauper 5y agoIf it's a bubble, it's a pretty lousy one in terms of returns. Some energy stocks were up 100-1000% a week ago due to surging oil prices. And then some SPACs were up 500%. Some guy on reddit's wallstreetbets recently turned $17k into $600k with amazon call options. I never seen anyone make those kind of returns with crypto...just guys with tiny Binance or Coinbase accounts who are happy to make 20% from a $1000 initial investment. The same coins now like litecoin are unchanged even as far back as 2017. So either it's a weak bubble or a deflated one. Compared to stocks, Crypto is dead..nothing goes up for more than a day..tons of wash trading. tons of scams. 3x tech etfs are way better than bitcoin anyway. I would rather own TECL and TQQQ instead of bitcoin. TECL and TQQQ were up over 100% in 2021 compared to 60% returns for bitcoin.
- samtho 5y agoThe wild fluctuations in price, even if the average stays the same, is what enables returns here, not the rise of value over time. I have a bot that trade on the highs and lows of the day, and it can make an absurd amount of money. Also, buying very large quantities of fringe alt coins at millionths of a dollar each can pay off if the coin ends up rising in popularity and price. I do a few moon shots each year and cash out in November when crypto rallies. I’ll put $500 in 10 coins and usually one or two of them 100x at some point. I have my notifier send me a text message when it’s time to sell. Not saying this stuff is useful, because it totally isn’t at this point. Well, except perhaps to make some random people a lot of money from nothing.
- fb03 5y agoDid you code the stuff yourself? How did you start? I am looking forward to writing my own stuff. I found that some exchanges like OKX/OKEX have APIs that allow you to algorithmically trade.
- samtho 5y agoI was using a smaller exchange’s API but now I use alpaca.markets. I wrote the program in Node.js that just runs a callback function every N second interval and decides if it’s a good time to buy, sell, or do nothing. My best advice to getting started is write your trading algorithm or decision making logic in a parameterized way so you can feed in snapshots of time for back testing. I’m sure there are frameworks out there but I literally wrote this hot garbage in a weekend with not a lot of research. I’ll probably rewrite it someday and optimize it a bit more.
- abetusk 5y agoThe article starts out with this quote: """ “The four most expensive words in investing are: ‘This time it’s different.'” """ And then proceeds to talk about cryptocurrency as a bubble. The same rhetoric was used for email, webcams, web browsers, and internet companies (dot-com bubbles, VCs etc). This time is much the same. There's a lot of hype and a lot of hate. Behind the hype is real technology that is in the process of being deployed.
- johanneskanybal 5y agoFeels like we argue this here every week. It’s a dumb article and he could start by reading any of the previous posts around here but that would take effort.
- markthien 5y ago
- jacknews 5y agoA possible use-case is inter-bank settlement. Currently FX trades between banks are settled by a bank-owned coop type system, CLS bank.
- ttul 5y agoMy personal view is that crypto currencies are basically the last frontier for capital to flow into in an environment of extreme accommodation and support by central banks. As central banks remove their support for the economy in the coming year or two, we ought to see a lot of money flowing out of crypto currencies and back into other things that are less risky.
- stazz1 5y agoI think you're missing a lot of information from your article and your thinking. The creative limits of a new organizational strategy for information are nonexistent. That is, when the vacuum-tube was invented, no one foresaw the integrated circuit. When the personal computer was made possible, no one really foresaw the internet. When the internet was spawned, nobody really foresaw large companies dominating the mental associativity with the 7th and 8th letters of the alphabet. So it goes, things are not easily forecast-able. I agree with your first point. Your second point is where you lose me. Consider that lots of "value" is actually encased in digital content. Anything that we use to negotiate, sell, buy, barter, trade, or exchange valued digital assets, itself begins to have value by virtue of facilitating the exchange. In this way of thinking, while a credit card company does not produce anything new, it still provides new value to the equation or scenario by enabling exchanges that were previously not possible. Now, you can ask, quite intelligently, "what are the maximized branches like for exchanges that are now possible via decentralized ledger that previously were not?" And there you might find a cap represented as a ratio of real creativity. I define creative outputs as the fruits of mother nature and the fruits of the human mind. I define value in an ambiguous way, or ambivalent way, because the getting-of-the-food and the consuming-of-the-food are distinctly different modes of value, but culminate in the same process of satisfying a lack, want, or need. I could ramble on, if you have a question about anything I've mentioned please do not hesitate.
- esrauch 5y agoSurely some technologies show early promise but turn out to be evolutionary dead ends though, and we just don't know/think about them because they didn't end up relevant to modern life. Maybe one example is space travel. My parents generation was apparently convinced that we'd have hotels on the moon by 1990. Probably most 20 year olds don't think we'll have hotels on the moon in their lifetime now.
- dimsumbytes 5y agoIt's been 13 years. How long would we wait before we declare it unproductive?
- 5y ago
- tobz1000 5y ago> any use of blockchain technology in which the ledger is not self-contained [is unusable because] there can be no trust-free link between the ledger and the physical world. Sure, data would need to be verified by a trusted party when it's first entered. A blockchain still protects against forgery after this though.
- dropnerd 5y agoif it's a hardened blockchain like ethereum, it also protects against actors who'll insist that they never said x. the blockchain is forever
- throwaway22032 5y agoI literally use it to pay for education. That's about as productive of a thing as I can imagine. I suppose physically producing a thing might be a step above that depending on whether it's a useful thing. Satoshi's words come to mind on this. If you don't get it (or it's not useful for you), that's fine. Really it's just amusing 14 years in that you don't realise you're the old man ranting in the pub.
- deleted 5y ago[deleted]
- BearsEatBeats 5y agolet's just keep it simple. crypto is good for the following: 1. when you're living in armageddon and/or under an authoritative regime and/or need an exit from fiat for wte reason. not saying it's easy to exit into it, but it's there 2. to create a recursive never-ending loop of collateralized lending. to trade tokens in order to create tokens that can then be traded for other tokens used to collateralize lending for a different set of tokens for anything else, there are better and more efficient solutions.
- pavlov 5y agoCrypto people love to say “it’s the early days.” But it’s not. Bitcoin is 13 years old. At that age, Windows was on >90% of the world’s computers. Java at age 13 had taken over enterprise software and was about to conquer mobile via Android. Cryptos are used by maybe 0.1% of computer users (if we’re very generous about what exactly constitutes usage). Considering the amount of investment they are an expensive failure by any normal metrics like monthly active users. It’s not the early days. Rather these are the last days for VCs to sell you this tired old thing before the novelty wears off, and that’s why they are so frantic about pushing it via Hollywood celebrities and whoever else they can muster with money.
- alexyim 5y agoIt feels weird that supporting crypto almost feels like a contrarian view judging from the comments here. It sounds like the author is describing crypto as a ponzi (rather than a bubble) and I'd agree too if crypto never ends up on delivering real value. But it already has in terms in efficiencies (e.g. money transfer and cutting out middlemen is a 10x improvement) and I definitely think we're starting to see more. I think that crypto hasn't quite integrated with society yet (yet is the key word). Once it does, crypto will be operating less within its own sandbox and will have more impact on society. It needs to marry into our legal system and deal more with oracles bridging the real world into the crypto world. When you say Bitcoin is 13 years old you're only looking at it from a technology standpoint. It's made a few strides in this time period, but I think we could also consider Bitcoin as a monetary good. From that lens, as something to think about, how long did it take for gold to be accepted as currency? The rest of crypto is much less than 13 years old and I think we'll start seeing more of their impact in the next 5 years.
- chasil 5y agoThis is a major problem. Without redesign, this falls on "q-day". https://csrc.nist.gov/Projects/post-quantum-cryptography/round-3-submissions https://csrc.nist.gov/Projects/post-quantum-cryptography/rou... "Formal complaint regarding 8 June 2021 incident - 2021.06.15, Daniel J. Bernstein "Executive summary. A week ago Dr. Daniel Apon from NIST publicly accused me of professional misconduct. Specifically, he accused me of initiating private contact with NIST so as to provide false information to NIST regarding the timing of an upcoming announcement relevant to NIST’s ongoing decisions..."
- madrox 5y agoAt this point, I think the "will it or won't it?" questions of crypto are meaningless. There's simply so much mindshare wrapped up in crypto that even if it stops being exchangable for dollars people will keep doing things with it. It's also decentralized enough that removing the actual infrastructure would be difficult. It may or not end up looking exactly like traditional money, but it'll look like something.
- tippytippytango 5y agoNothing in here that hasn't been said in the last 10 year. It's tempting to dismiss it as a bubble. But; most bubbles don't get 2nd, 3rd, 4th, 5th... etc. chances. Every time bitcoin crashes people say "this one is different, this time it's dead for real", then it bounces back. It's proving to be far more cockroach like than anyone anticipated. In the more distant future, if bitcoin survives, its utility will just be one thing, it will be regarded as a unit of measuring transaction value independent of any government. It will not be a replacement for any sovereign currency. Just this extra tool out there in the ether of finance. Notions of store of value, blockchain, proof of work etc. will be regarded as implementation details of achieving a global unit of account. Think of it like the SI unit of value, kilogram, meter, bitcoin. It's still far too illiquid to serve that purpose now; but, once it has at least an order of magnitude larger market cap it may.
- effancy 5y agoKeep on dreaming. The reason why he has no new arguments is that the case is clear and simple.
- tippytippytango 5y agoJust staying open to the bull and bear case. None of us really know the future.
- Retric 5y agoBubbles only look like pure movement in one direction when zoomed out, the 90’s stock market had plenty of setbacks on what we recall as a seemingly endless rise. For example 1997-10-27 the DOW had a single day drop of −7.18%, a direct quote from the time period: "I came in to look at my stock prices and I said, 'Oh my God, it's a crash!’” But nope just a minor correction. https://money.cnn.com/1997/10/27/markets/marketwrap/ https://money.cnn.com/1997/10/27/markets/marketwrap/ Crypto is inherently less stable which amplifies minor corrections, but that’s not what crypto’s bubble bursting looks like. When prices drop 99% that’s when the bubbles burst.
- 5y ago
- stewbrew 5y agoNot convinced. I think we are still in a rather early phase of the hype cycle where people explore possible uses of the technology. What makes it difficult to think about "crypto" is a certain disillusionment around Bitcoin and similar efforts and the fact that people think the ideology behind Bitcoin etc. should also apply to all other possible uses. But they are confusing crypto in general with a certain application.
- anm89 5y agoOf all the things to debate on the internet, this seems like one of the most disingenuous. There are active markets. You can very wasily short or long it. There's no reason to yell into the void. Just go take your position and move on.
- theknocker 5y ago
- sunshinekitty 5y agoas much as there’s a vocal group circle jerking crypto, there is an equivalent group circle jerking hate for crypto on HN who cares?
- tzumby 5y agoThe author brings up a very good point about controlling the monetary policy which made me think about the impossible trinity. I have a very basic macro Econ 101 understanding of this, but it seems to me like the dials the central bank used to tweak things like inflation and unemployment are delayed and not precise at all. I think innovations in public ledgers along with things like automatic market makers can tighten the feedback loops so that hopefully one day we have such a high degree of integration that interest rates and inflation balancing can be tweaked in real time
- worik 5y ago"Crypto is an Unproductive Bubble" This has to win a prize for the most redundantly true headline ever
- deleted 5y ago[deleted]
- jasfi 5y agoThere are good trading opportunities in crypto. I'm working on an automated trading system that has an Open Source client: https://tradecast.one https://tradecast.one
- throwaway76587 5y agoJudge by yourself. In the past month I made the following transactions, many of which would be impossible, dangerous, expensive or complicated without the crypto. - Refilled my sim card in a foreign country for 0.0004 Lightning BTC - Bought a VPN account for my friend in a country with heavy censorship for 0.0015 Lightning BTC - Sent 100 and 150 USDT to my friends in a sanctioned country - Donated 0.026 to EFF - Donated 0.29 BTC to Ukrainian defense - Donated 0.22 ETH to Navalny team - Took my savings out of a country that forbids outwards money transfers So it's been pretty productive for me. In addition, I protected my savings from inflation.
- kkfx 5y agoIMVHO crypto was and still is a test by IT giants to overthrown classic banking systems, reasoning that they were/are strong enough. Most think cryptos are "free", IMVHO they are definitively not: - to exchange crypto you need an internet-connected computer, you can't exchange anything from a human to another human being, many might state that's not different than bank transfer on X.25 but it's different from cash, and that's just the appetizer that simply mean: to participate to the economy you need to be connected, and you can choose between few big ISPs for that and you need a computer chosen between the very few manufacturers we have around the world, typically a computer filled of proprietary FWs like moderns ones; - cryptos are based on a "blockchain" concept, witch means on a giant append-only file, that's means sooner or later home computer will have not enough storage nor bogomips nor bandwidth to operate cryptos "freely", exchanges will be mandatory by technical needs, not by laws, since only big server farms will be able to process transactions at a viable speed. At this point the "free" and "open" part is gone. At this time cryptos are like today's banks, BUT without State laws and protection, an exchange can be in an exotic place, can disappear and start over with another name etc it's costumers are and will be totally powerless; - not only: since we pay "on-the-go" naturally with cryptos wildly adopted that means de facto mandatory smartphone always with any humans, like the wallet in your pocket, and smartphones not only means already mandatory exchange on a hyper-surveilled platform but also means depend on them for anything, being unable to even buy food without and integrate social scoring it's natural. Take the above and observe what WEF want in terms of digital identities and payments systems https://www.weforum.org/agenda/2021/01/davos-agenda-digital-identity-frameworks/ https://www.weforum.org/agenda/2021/01/davos-agenda-digital-... perhaps together with https://www.protocol.com/entertainment/upland-augmented-reality-real-estate https://www.protocol.com/entertainment/upland-augmented-real... and you close the circle: cryptos so far are not there, but have created a narrative that digital currencies are good and needed. Most people do no even know the difference between cryptos and CBDC, in the end for most means just numbers inside a mobile (cr)app or website. I expect in a decade a final success of the cash-less push, with the sole payment system remained a smart-phone based one, connected and surveilled, of course linked to a digital ID, of course linked to social score: wellcome to the "western version" of modern China, evolved to surveil even more. Oh beware a thing: if you want to wait and see because seems too extreme to be true... Once inside such systems, once our IDs, payment systems, social scores are implemented only an improbable civil war can overthrown them, and in a hyper-surveilled and hyper-centralized society where from ovens to toothbrushes to cars anything is connected a civil war means a thing: any Citizen can only let itself die hoping that's enough to crash dictatorship dominance, because it's impossible to fight if you can't eat, you can't travel because all the means to do so are connected and centralized in few hands. Take then a look as software these days: we tell for decades that we need FLOSS etc, what happen in the meantime? Emails are still there, only for 99% are webmails, so nothing practically different than a proprietary service like WA or Telegram. Dependence on few giants is far bigger then ever, anything desktop-centric and P2P-centric is disappeared, even tech communities are now on Reddit, HN etc, witch means on proprietary third parties platforms instead on open Usenet no one really own. Most people, devs included, live on APIs and cloud. Did you really think we are so far from the society depicted above? In the IT we already almost owning nothing "and being happy", actually IT is the core of our society functioning. Companies, especially from the finance sector have internal social score since decades, people think a society like a company, witch means a hierarchy not a Democracy etc...
- trapatsas 5y agoThe idea that crypto is dead is older than crypto: https://99bitcoins.com/bitcoin-obituaries/ https://99bitcoins.com/bitcoin-obituaries/