3 ms·
> Disclaimer - I have invested 1% of my savings into stable cryptocurrencies such as Bitcoin and Ethereum etc. ... well, this individual appears not to know th
by arcticbull 5y ago
> Disclaimer - I have invested 1% of my savings into stable cryptocurrencies such as Bitcoin and Ethereum etc.
... well, this individual appears not to know the definition of stable, but do go on.
> Cryptocurrency returns are a zero-sum game i.e. if 1 person gets a $10 profit, another person has to lose $10.
First, equities are positive-sum games, which makes them, on the whole, in the fullness of time, a strictly better investment. It is not true that someone has to lose for someone else to win in the equity markets. Shareholder returns are derived from the business itself.
Second, proof-of-work currencies are negative sum, since the miners have to expend unfathomable quantities of electricity and generate mountains e-waste. This costs money. This money is obtained by selling the block reward, which puts negative price pressure on the cryptos. So not only are the only source of returns other gamblers, there's also a hole in the bucket. In gambling parlance, that's the rake in a game of poker.
- thebean11 5y ago> Second, proof-of-work currencies are negative sum Assuming the network doesn't produce external value to the people transacting on it (for example, lower transaction fees than alternatives, lower cost to enforce contracts, lower spread trading equities or currencies etc).
- jonny_eh 5y ago> Assuming the network doesn't produce external value They don't, definitely nowhere near the amount currently invested.
- thebean11 5y agoSure, the point is there's a difference between: "this system is currently costing more than it is producing" vs "this system, by definition, is negative sum" The first is a comment on the current state of the thing, the second is an immutable statement about the thing's nature, which in this case is false.
- arcticbull 5y ago> Assuming the network doesn't produce external value to the people transacting on it (for example, lower transaction fees than alternatives, lower cost to enforce contracts, lower spread trading equities or currencies etc). The hypothetical value generated accrues to those who hold equity in the miners or network operators (stakers in a PoS system) - not the tokens themselves. If Starbucks pre-sold coffee as tokens, the fact that Starbucks is selling more or less coffee means nothing for the value of the token.
- thebean11 5y agoI'm talking about value created for users of the network, not token holders miners or stakers. Let's say I use the network to send $5k to a relative in another country and this transaction costs me $1. If I otherwise would have paid $5, then $4 of value is created external to the network itself.
- deleted 5y ago[deleted]
- arcticbull 5y agoThe way I'm looking at it: if I save money moving dollars using Wise instead of PayPal, that doesn't change the value of a dollar. So why would saving money moving dollars using ETH instead of Wise change the value of either ETH or USD? The value doesn't accrue to the token holder in any case. Am I missing something?
- thebean11 5y agoTo some extent it does. The person moving money is paying transaction fee in ETH creating demand for ETH. Additionally, a part of that transaction fee is burned (permanently deleted) creating a deflationary effect on all other ETH.
- arcticbull 5y agoI can see that argument, yeah. Curious to see it quantified, but I concede.
- PaulHoule 5y agobut isn't it really higher transactions fees, algorithmically enforced 'contracts' that get exploited by hackers, ... ?
- thebean11 5y agoYeah that's true in practice but I think a lot of new tech was in the same boat. The first cars were much worse than horses to use an old example
- notch656a 5y ago>Second, proof-of-work currencies are negative sum You could have just said currencies are negative sum. Your argument doesn't pertain exclusively to crypto. It cost electricity and resources to print and wire transfer dollars and yen, for instance.
- arcticbull 5y agoI suppose so, but currencies aren't investments. There's a big difference in how they're marketed. Your goal is never to hold dollars for a long period of time - after all, average case the dollar goes down at minimum 2% per year. Your goal is to productively allocate that capital into actual investments. On the other hand crypto is marketed as an investment that you are to hold for long periods of time. Crypto is sold as something that goes up over time, and should be compared to other things that are marketed that way.
- notch656a 5y agoI suppose it depends on how you use the underlying instrument. Some people use currencies or their derivatives as investments, particularly forex traders. Some may use crypto essentially as a currency. The 'marketing' isn't unified and depends on who you listen to. For instance, the bitcoin whitepaper itself doesn't promise real returns on 'investment.' >On the other hand crypto is marketed as an investment that you are to hold for long periods of time I'm with you that this is probably not a good viewpoint to take, but I don't think that's the only viewpoint out there on how to use crypto.
- arcticbull 5y agoIn Forex trading, you're short-selling one currency and buying another. It's not an investment, it's a pair trade. Nobody buys USD or NZD or any other currency expecting to walk away with more value in the currency itself. You're making money on the divergence or convergence in purchasing power of a currency in one country vs. another. Your goal is to walk away with more units of your currency than you had to start, not that each of those units will be worth more.
- onlyrealcuzzo 5y ago> So not only are the only source of returns other gamblers, there's also a hole in the bucket. But there's also someone constantly filling the bucket with pretend water (Tether) faster than the real water falls through the hole.
- gogo61 5y ago*relatively stable. I know you are referring USDT as stable coin.