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I don't entirely buy the "no liquidity" argument. I can sell 10,000 ETH on-chain right now and have a 0.28% price impact. That settles in 12 seconds with finali

I don't entirely buy the "no liquidity" argument. I can sell 10,000 ETH on-chain right now and have a 0.28% price impact. That settles in 12 seconds with finality in six minutes. Guess how much Apple stock I can sell right now? Zero. Stock markets are currently closed and Apple cannot be traded. When they are open, I'm looking at a T+2 settlement window. That's not very liquid. One might even call it market manipulation to only open for trading 18% of the time, and of course to shut off trading at any other time on a whim.

mjburgess 3y ago
The alleged "market cap" of ETH is presently: $236,692,623,586 . Consider an IPO for a company which sells shares, there is no question "at what point does the share price collapse to zero" -- it has a price. The company is worth something: it has profit/loss, assets, etc. Consider selling all ETH for USD -- the obvious question, to me, is: at what point does the price collapse to zero? 10% of them? 15%? 25.00000001%? This is an extremely non-linear effect, after 20bn is sold it might just be the next dollar afterwards. Or 50bn. Or 15bn. I suspect there's about 20-50bn of "real money" in the system, radically double (-double-double) counted by many participants (esp, eg., via tether). If any coins on any chain were sold off at a high enough rate, perhaps so the total across the entire ecosystem were a trivial 10-20% of ETHs alleged "market cap" -- i think the whole thing goes to zero. At 18.9111123% there'll be no buyers at any price, everyone will realise, and bang goes the whole show. You can't say that about apple; or any stock whose value derives from owning a business that has *actual assets. ie., I think the fragility here, of this system and this posted numbers, is radically extreme in percentage terms. Yes, your $1m USD here or there will make no difference.
- junofan 3y ago
  You’re basically just saying ETH itself isn’t an actual asset. However, it’s needed to use the Ethereum network.
  - mjburgess 3y ago
    I imagine you aren't joking... but this might well be a joke. The ethereum network has no use, right? Nothing is priced in ethereum, no one needs ETH, nor will they ever. Magic beans might be required to play the magic bean game -- casino chips are required by the casino, sure. But people enjoy gambling, there's an exchange of value -- a reason a person will work a day to make $100 and then trade it for an evening gambling. But cryptocurrency networks do not have any reason to use them: nothing is priced in them, no govs tax in them, no businesses hold them, and so on. There's smallish number of criminal gangs (and the like) who do have a use: a lot of crime today is priced in crypto. This gives highly anonymous networks an actual exchange value for their tokens. I suspect this minimal value will be targeted by relevant govs eventually, and disappear.
- tornato7 3y ago
  If you hold common stock in Apple, you have very little right to their assets in a ' collapse to zero' scenario. Preferred stock may have some floor price where the value of a company's assets prop it up, but not the common stock you buy on an exchange. Ethereum, like Apple, has a dividend. You can stake ETH and earn rewards from the network. Granted, these rewards are accrued in ETH, but they are mostly based on gas fees that users pay the network, which has no dependency on the price of ETH. ETH is bought and sold with dollars so your dividend comes through with a thin layer of abstraction. However, people don't buy Apple stock for it's asset value or its dividend. They buy it because of the huge TAM of Apple and promise of future growth. Similar to why people buy Ethereum's token. Let's look at a different stock: DoorDash. They lose money hand over fist every quarter. They have very little assets, and again if you're a common stock holder those shares will be worth $0 when the company is liquidated. However it's still worth a nonzero sum because of speculation and future expectations of growing or turning a profit. Does that makes it a scam? Is their market cap fake because it can collapse to zero say any moment?

mjburgess 3y ago

The alleged "market cap" of ETH is presently: $236,692,623,586 . Consider an IPO for a company which sells shares, there is no question "at what point does the share price collapse to zero" -- it has a price. The company is worth something: it has profit/loss, assets, etc. Consider selling all ETH for USD -- the obvious question, to me, is: at what point does the price collapse to zero? 10% of them? 15%? 25.00000001%? This is an extremely non-linear effect, after 20bn is sold it might just be the next dollar afterwards. Or 50bn. Or 15bn. I suspect there's about 20-50bn of "real money" in the system, radically double (-double-double) counted by many participants (esp, eg., via tether). If any coins on any chain were sold off at a high enough rate, perhaps so the total across the entire ecosystem were a trivial 10-20% of ETHs alleged "market cap" -- i think the whole thing goes to zero. At 18.9111123% there'll be no buyers at any price, everyone will realise, and bang goes the whole show. You can't say that about apple; or any stock whose value derives from owning a business that has *actual assets. ie., I think the fragility here, of this system and this posted numbers, is radically extreme in percentage terms. Yes, your $1m USD here or there will make no difference.

junofan 3y ago
You’re basically just saying ETH itself isn’t an actual asset. However, it’s needed to use the Ethereum network.
- mjburgess 3y ago
  I imagine you aren't joking... but this might well be a joke. The ethereum network has no use, right? Nothing is priced in ethereum, no one needs ETH, nor will they ever. Magic beans might be required to play the magic bean game -- casino chips are required by the casino, sure. But people enjoy gambling, there's an exchange of value -- a reason a person will work a day to make $100 and then trade it for an evening gambling. But cryptocurrency networks do not have any reason to use them: nothing is priced in them, no govs tax in them, no businesses hold them, and so on. There's smallish number of criminal gangs (and the like) who do have a use: a lot of crime today is priced in crypto. This gives highly anonymous networks an actual exchange value for their tokens. I suspect this minimal value will be targeted by relevant govs eventually, and disappear.
tornato7 3y ago
If you hold common stock in Apple, you have very little right to their assets in a ' collapse to zero' scenario. Preferred stock may have some floor price where the value of a company's assets prop it up, but not the common stock you buy on an exchange. Ethereum, like Apple, has a dividend. You can stake ETH and earn rewards from the network. Granted, these rewards are accrued in ETH, but they are mostly based on gas fees that users pay the network, which has no dependency on the price of ETH. ETH is bought and sold with dollars so your dividend comes through with a thin layer of abstraction. However, people don't buy Apple stock for it's asset value or its dividend. They buy it because of the huge TAM of Apple and promise of future growth. Similar to why people buy Ethereum's token. Let's look at a different stock: DoorDash. They lose money hand over fist every quarter. They have very little assets, and again if you're a common stock holder those shares will be worth $0 when the company is liquidated. However it's still worth a nonzero sum because of speculation and future expectations of growing or turning a profit. Does that makes it a scam? Is their market cap fake because it can collapse to zero say any moment?