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I am not a crypto lover by any means, but this article is centered around a meaningless gimmick. No insight is gained by making up an incoherent concept, the ze
by civilized 4y ago
I am not a crypto lover by any means, but this article is centered around a meaningless gimmick. No insight is gained by making up an incoherent concept, the zero coupon perpetual bond, and declaring cryptocurrency an instance of this concept. It's just "crypto is a scam" for those who fancy themselves financial sophisticates because they know basic interest formulas.
- robertlagrant 4y agoI don't understand. Do you have any reasoning to back up your assertions?
- glitchc 4y agoSince the article author provides zero evidence for their claim, the OP's statement is reasonable.
- jimmywetnips 4y agoDid the author? I mean by the very limited definition, aren't all "things" I buy at the store fitting of that description? Why does anyone buy anything at the store when it doesn't pay you interest and will never have a maturity date that you can be paid back?
- teoksdorf 4y agoThe things you buy at the store are not financial assets
- robertlagrant 4y agoSeveral people seem to think I'm comparing the comment with the author. I don't know how to ask for an explanation more simply.
- miohtama 4y agoIt’s a broken analogue in the first place, because bonds are debt instruments and cryptocurrency is not a debt instrument. The author also does not seem to know that blockchains do have economic activity and transaction fees that can form the element of interest or free cash flow. As a stretch, the article comparison could be made for a stock that never pay dividends, like Uber. It is still an interesting comparison, nevertheless,
- runeks 4y agoThe "zero coupon perpetual bond" is meaningless because it has nothing to do with a bond, ie. there is no exchange of wealth for income. If you take the only two defining features of a concept and remove them both then you're left with something meaningless.
- civilized 4y agoA zero coupon perpetual bond is obviously pointless. It's just a fancy way of saying "let's enter into a financial agreement where you pay me money and I will never pay you anything back, neither interest nor principal". The concept doesn't exist outside the author's head because there is no circumstance under which anyone would need the concept. If you want to give someone money and never get anything back, you don't need a bond. Cryptocurrency, on the other hand, is at least potentially valuable, if people find a way to use it to do real things. Which they have: for example, it is used extensively for remittances in countries with unreliable financial systems.
- roenxi 4y agoNotably, obviously we can't value cryptocurrencies as bonds because then they would be worthless. Even the most ardent cryptosceptic would have to admit that a bitcoin is worth something, just as a memento of being part of the fun. Even if the exchange rate is 10k bitcoin/pizza. It would be like valuing gold as a bond and determining the value is 0. The value is higher than that because the value isn't in a coupon. Also, ironically, I suspect a zero-coupon bond would probably be worth something because it is likely that some central bank would happily overpay for it in a crisis.
- teoksdorf 4y agoI think you will find even mild cryptocritics think cryptocurrencies are worthless.
- datadata 4y agoGermany actually recently sold negative coupon bonds, i.e a buyer of this bond would pay more upfront than the maturity value. https://www.reuters.com/article/germany-auction/update-2-germany-sells-new-30-year-bond-with-negative-yield-a-first-idUSL5N25H29G https://www.reuters.com/article/germany-auction/update-2-ger...
- Scubabear68 4y agoZero coupon bonds exist, they work by being sold at a discount eg just making this up, a $1000 bond might be sold at $950 for 1 year term. So you pay $950 now and get $1000 in a year.
- reedjosh 4y agoNobody said they didn't. The article details that. What's claimed not to exist is a Zero Coupon Perpetual Bond. A bond that never matures and pays no interest. Of course then the article claims crypto is this type of bond. It's a mathy financial jargon gimmick argument.
- landemva 4y ago> A bond that never matures and pays no interest A modern printed dollar note perhaps does this. The perpetual part requires the government to not cancel the note, which occurred in India and Europe in past couple decades.
- pjc50 4y agoIt's addressing what you get for "investing" (buying and holding) a cryptocurrency. Do you get coupons? No. Do you get a return of principal? Also no. Do you get an equity-like interest? No, that would make it an unlicensed security. (Someone is arguing that there are cryptos that do pay coupons, which invites my favourite question: who's taking the other side of that trade?)
- incrudible 4y agoWhat do you get for investing in the US dollar or the Japanese yen?
- pjc50 4y agoPeople don't invest in those per se, they trade them or swap them for debt-like instruments at the first opportunity.
- incrudible 4y agoNobody is buying and holding dollars?
- pjc50 4y agoCompared to T-Bills or various sorts of money market funds, the amount of just holding dollars for investment (rather than for cashflow needs of a business) is tiny.
- incrudible 4y agoOne might say the same about cryptocurrency.
- pessimizer 4y agoFewer dollars or yen than you had yesterday?
- 4y ago
- RandomLensman 4y agoI think, some people actually toyed with the idea of government zero coupon perpetuals in the mid-2010s when thinking about ways to counter deflation while rates are already at zero or negative.