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This is oversimplifying, but stocks are essentially purchasing a stake in ownership of the company. The company uses that money to advance its mission - ideally

This is oversimplifying, but stocks are essentially purchasing a stake in ownership of the company. The company uses that money to advance its mission - ideally generating more profits which are shared with the stockholders (dividends). It's that stake in ownership and expected dividends that give stocks inherent value. There is no company behind crypto currencies that holders get ownership of. There is no product or service to drive profits. There are no dividends, voting power, or anything that gives inherent value to the coins. It's all pure speculation. Just money getting shifted around among the holders - with exchanges taking a cut off the top of each transaction.

fragmede 3y ago
I'm sorry, but what am going to do with my Class C shares of Google which have no voting rights? They also haven't paid dividends. My buying of them didn't give Google any money, either. My infinitesimal ownership in Google doesn't get anything other than it's a number in a database somewhere that hopefully goes up. There's underlying assets there, sure, but as we've seen with GME, TSLA, and now NVDA, it's all just vibes. In this case though, FTX had their own token FTT that gave people that owned it voting rights in FTX and "staking rewards" aka dividends. It's not worth anything today due to the fraud that SBF perpetrated, but that sure smells a awful lot like a stock to me.
- hgomersall 3y ago
  Right. There seems to be a real aversion to accepting that trading shares is really just middle class gambling.
  - methodical 3y ago
    Stocks are not completely nondeterministic games of chance, which is why most people who hold properly diversified stock portfolios have seen long-term growth instead of loss. That's probably why people don't call it gambling.
    - Zpalmtree 3y ago
      Crypto is not a completely nondeterministic game of chance either. There are people in crypto who are consistently profitable.
      - methodical 3y ago
        Who in crypto is consistently profitable?
    - deleted 3y ago
      [deleted]
    - kelnos 3y ago
      > Stocks are not completely nondeterministic games of chance That's a bit of a straw man, as no one claimed they are. "Gambling" is often not a nondeterministic game of chance, either. For example, when I go to a casino and play poker, I'm still gambling, even though there's plenty of determinism and strategy to go along with the elements of chance.
  - ryan_lane 3y ago
    Long-term investors are buying more stocks at a lower price, with the idea that at some point the company may eventually pay dividends that justify the price of the stock, at which point they get more share of the dividend profits. Folks who purchase these stocks after this point would base the value on the value of the dividends. Day traders are gamblers. Cryptocurrencies will _never_ pay dividends, because they are based purely on speculation. These things are absolutely not the same. Cryptocurrencies only provide gambling.
    - fragmede 3y ago
      In what way is staking not basically paying dividends?
      - ryan_lane 3y ago
        Because it also requires validating transactions. You're providing collateral to be trusted to perform a service, for which you're paid.
        fragmede 3y ago
        It does? All I did was click a button on Coinbase, and I get like 5.1% APR. (Or I did until the SEC said they weren't allowed to do that anymore because they didn't give me enough disclaimer that they might lose my money.)
        ryan_lane 3y ago
        That's because they're running the validators, and they're sharing some of the gas fees with you. If you're getting a high APR it's because the protocol is extremely expensive for users. Imagine if your stock trades, purchases, or bank transfers cost 5% (which is a low estimate, because if you're getting 5.1%, then Coinbase is also taking a cut). You're locking up your crypto for this for some period of time, which means you lose liquidity to get gains. During that period of time the coin can crash and you're out of that money. For stocks, you don't need to lose liquidity to get dividends. For companies generating profit, they don't necessarily need to be parasitic to generate those profits. It's possible to generate profits while also providing value for users. Take for instance Venmo and the ability to get funds from your wallet into your bank instantly. Venmo is taking risk by doing so, the banks are taking risk to do so. They charge you a fee for this risk. You want your money faster, and they want their risk covered. They're going to eat some amount of fraud by providing this service, but the cost of providing it should cover the fraud cost and offer a small profit. It's mutually beneficial and optional (regular bank transfers are slower, but free). Lots of SaaS products are similar. They offer a product businesses need, at a lower cost than the businesses would have to pay to build/run it themselves. Those are profitable things that are just services, like crypto, but businesses also build things that have physical value, like houses, undersea communication cables, etc. If people stop trading crypto, all value is immediately gone.
- gambiting 3y ago
  >>My buying of them didn't give Google any money, either. really? how can that be true?
  - fragmede 3y ago
    Yes. Read up on how it all works, or ask an LLM about it.
    - gambiting 3y ago
      ...is explaining it here too much of an effort, or what? Like I don't mean to be rude, but that really doesn't strike me as an unreasonable question to ask.
      - kelnos 3y ago
        When you go to your brokerage account and buy a share of Google, you aren't buying it from Google, you're buying it from some other random shareholder out there who wants to sell. Google does not see a cent of that money. In general, the only times a company gets money when you buy shares are if you participate in an IPO, or if an already-public company decides to offer more shares for sale in order to raise some money, and you buy some of those shares. (There are exceptions, but retail investors like you and me usually don't get invited to participate in those deals, though.) The vast majority of shares that trade hands on the markets every day are not owned by the company whose name is next to the ticker symbol.
      - fragmede 3y ago
        I don't know what you do and don't know, and what misunderstandings you're operating under, and threaded forums really aren't set up for the kind of back and forth it would take to do a proper calibration so as to give an appropriate answer that is at the right level of explain-y, and not mansplain-y/condescending. But what the hell, I'm waiting on a build (rust). Companies IPO and sell shares. The company gets paid by people who want to own shares. The company IPOs and sells 1000 shares at $50 each, gaining them $50k which they can then use to buy a new whatever. Then, in a market like NYSE, other people can buy and sell stock. If I think the stock is undervalued I offer to buy 1 from someone at $55. that person gives me 1 stock, I give them $55, netting them $5. The company is not involved in this transaction and does not get anything from that specific transaction. Now that the price is at $55, the company could decide to sell additional stock, now at $55 instead of $50, but that's a separate event from the transaction that happened previously. So the company does benefit from the stock price being high, but not directly off each transaction. I've omitted all the details, but I think that's enough to get the gist of it.
- Fargren 3y ago
  >>My buying of them didn't give Google any money, either. You buying the stock raised the price of the stock. Google uses the stock as compensation. The higher the price, the easier they can hire, and the less cash they need to offer to employees while still being attractive.
hcks 3y ago
Why would someone sell the share for less than this "inherent" value then? Or conversely why would some buy for more than that?
- gambiting 3y ago
  They don't though? Share buy/sale price is directly correlated to the value of the company.
  - shinryuu 3y ago
    Which changes depending on how many buy the stocks. Was gamestop really worth billions at the top of the mania?
    - acdha 3y ago
      The market cap of its stock might but if you looked at the financial press during that episode it was full of people pointing out that there was no change in the fundamental value of the company. That’s because real businesses have things like sales volume, profit margins, property rights, etc. which aren’t entirely arbitrary and dampen the swings considerably. That’s not perfect or immune to abuse as Boeing shareholders are no doubt aware but it’s very different from something which has no grounding beyond momentary social consensus.
      - shinryuu 3y ago
        While I agree that there is a lot of hot air in crypto, what gives value to something like ethereum is the fact that you need it to use the network. Given people think it's useful to use that network it will give value to ether.
        acdha 3y ago
        That does add some value but it’s fairly weak - people can always choose to switch to something cheaper, capping the maximum - and it adds its own risks: price spikes might leave you unable to perform transactions within your budget.
kelnos 3y ago
> This is oversimplifying Yes, and in doing so you've managed to blissfully ignore all the speculation and outright gambling that goes on in the stock market. I'm not a crypto defender; I think it's mostly useless and a waste of people's time and money. But let's not paint a big rosy picture of the rest of our financial system. That's just not where the truth lies.
- CivBase 3y ago
  I did no such thing. I only answered the question I was asked. For some reason a bunch of people interpreted that as a defense of short-term stock trading.

fragmede 3y ago

I'm sorry, but what am going to do with my Class C shares of Google which have no voting rights? They also haven't paid dividends. My buying of them didn't give Google any money, either. My infinitesimal ownership in Google doesn't get anything other than it's a number in a database somewhere that hopefully goes up. There's underlying assets there, sure, but as we've seen with GME, TSLA, and now NVDA, it's all just vibes. In this case though, FTX had their own token FTT that gave people that owned it voting rights in FTX and "staking rewards" aka dividends. It's not worth anything today due to the fraud that SBF perpetrated, but that sure smells a awful lot like a stock to me.

hgomersall 3y ago
Right. There seems to be a real aversion to accepting that trading shares is really just middle class gambling.
- methodical 3y ago
  Stocks are not completely nondeterministic games of chance, which is why most people who hold properly diversified stock portfolios have seen long-term growth instead of loss. That's probably why people don't call it gambling.
  - Zpalmtree 3y ago
    Crypto is not a completely nondeterministic game of chance either. There are people in crypto who are consistently profitable.
    - methodical 3y ago
      Who in crypto is consistently profitable?
  - deleted 3y ago
    [deleted]
  - kelnos 3y ago
    > Stocks are not completely nondeterministic games of chance That's a bit of a straw man, as no one claimed they are. "Gambling" is often not a nondeterministic game of chance, either. For example, when I go to a casino and play poker, I'm still gambling, even though there's plenty of determinism and strategy to go along with the elements of chance.
- ryan_lane 3y ago
  Long-term investors are buying more stocks at a lower price, with the idea that at some point the company may eventually pay dividends that justify the price of the stock, at which point they get more share of the dividend profits. Folks who purchase these stocks after this point would base the value on the value of the dividends. Day traders are gamblers. Cryptocurrencies will _never_ pay dividends, because they are based purely on speculation. These things are absolutely not the same. Cryptocurrencies only provide gambling.
  - fragmede 3y ago
    In what way is staking not basically paying dividends?
    - ryan_lane 3y ago
      Because it also requires validating transactions. You're providing collateral to be trusted to perform a service, for which you're paid.
      - fragmede 3y ago
        It does? All I did was click a button on Coinbase, and I get like 5.1% APR. (Or I did until the SEC said they weren't allowed to do that anymore because they didn't give me enough disclaimer that they might lose my money.)
        ryan_lane 3y ago
        That's because they're running the validators, and they're sharing some of the gas fees with you. If you're getting a high APR it's because the protocol is extremely expensive for users. Imagine if your stock trades, purchases, or bank transfers cost 5% (which is a low estimate, because if you're getting 5.1%, then Coinbase is also taking a cut). You're locking up your crypto for this for some period of time, which means you lose liquidity to get gains. During that period of time the coin can crash and you're out of that money. For stocks, you don't need to lose liquidity to get dividends. For companies generating profit, they don't necessarily need to be parasitic to generate those profits. It's possible to generate profits while also providing value for users. Take for instance Venmo and the ability to get funds from your wallet into your bank instantly. Venmo is taking risk by doing so, the banks are taking risk to do so. They charge you a fee for this risk. You want your money faster, and they want their risk covered. They're going to eat some amount of fraud by providing this service, but the cost of providing it should cover the fraud cost and offer a small profit. It's mutually beneficial and optional (regular bank transfers are slower, but free). Lots of SaaS products are similar. They offer a product businesses need, at a lower cost than the businesses would have to pay to build/run it themselves. Those are profitable things that are just services, like crypto, but businesses also build things that have physical value, like houses, undersea communication cables, etc. If people stop trading crypto, all value is immediately gone.
gambiting 3y ago
>>My buying of them didn't give Google any money, either. really? how can that be true?
- fragmede 3y ago
  Yes. Read up on how it all works, or ask an LLM about it.
  - gambiting 3y ago
    ...is explaining it here too much of an effort, or what? Like I don't mean to be rude, but that really doesn't strike me as an unreasonable question to ask.
    - kelnos 3y ago
      When you go to your brokerage account and buy a share of Google, you aren't buying it from Google, you're buying it from some other random shareholder out there who wants to sell. Google does not see a cent of that money. In general, the only times a company gets money when you buy shares are if you participate in an IPO, or if an already-public company decides to offer more shares for sale in order to raise some money, and you buy some of those shares. (There are exceptions, but retail investors like you and me usually don't get invited to participate in those deals, though.) The vast majority of shares that trade hands on the markets every day are not owned by the company whose name is next to the ticker symbol.
    - fragmede 3y ago
      I don't know what you do and don't know, and what misunderstandings you're operating under, and threaded forums really aren't set up for the kind of back and forth it would take to do a proper calibration so as to give an appropriate answer that is at the right level of explain-y, and not mansplain-y/condescending. But what the hell, I'm waiting on a build (rust). Companies IPO and sell shares. The company gets paid by people who want to own shares. The company IPOs and sells 1000 shares at $50 each, gaining them $50k which they can then use to buy a new whatever. Then, in a market like NYSE, other people can buy and sell stock. If I think the stock is undervalued I offer to buy 1 from someone at $55. that person gives me 1 stock, I give them $55, netting them $5. The company is not involved in this transaction and does not get anything from that specific transaction. Now that the price is at $55, the company could decide to sell additional stock, now at $55 instead of $50, but that's a separate event from the transaction that happened previously. So the company does benefit from the stock price being high, but not directly off each transaction. I've omitted all the details, but I think that's enough to get the gist of it.
Fargren 3y ago
>>My buying of them didn't give Google any money, either. You buying the stock raised the price of the stock. Google uses the stock as compensation. The higher the price, the easier they can hire, and the less cash they need to offer to employees while still being attractive.

hcks 3y ago

Why would someone sell the share for less than this "inherent" value then? Or conversely why would some buy for more than that?

gambiting 3y ago
They don't though? Share buy/sale price is directly correlated to the value of the company.
- shinryuu 3y ago
  Which changes depending on how many buy the stocks. Was gamestop really worth billions at the top of the mania?
  - acdha 3y ago
    The market cap of its stock might but if you looked at the financial press during that episode it was full of people pointing out that there was no change in the fundamental value of the company. That’s because real businesses have things like sales volume, profit margins, property rights, etc. which aren’t entirely arbitrary and dampen the swings considerably. That’s not perfect or immune to abuse as Boeing shareholders are no doubt aware but it’s very different from something which has no grounding beyond momentary social consensus.
    - shinryuu 3y ago
      While I agree that there is a lot of hot air in crypto, what gives value to something like ethereum is the fact that you need it to use the network. Given people think it's useful to use that network it will give value to ether.
      - acdha 3y ago
        That does add some value but it’s fairly weak - people can always choose to switch to something cheaper, capping the maximum - and it adds its own risks: price spikes might leave you unable to perform transactions within your budget.

kelnos 3y ago

> This is oversimplifying Yes, and in doing so you've managed to blissfully ignore all the speculation and outright gambling that goes on in the stock market. I'm not a crypto defender; I think it's mostly useless and a waste of people's time and money. But let's not paint a big rosy picture of the rest of our financial system. That's just not where the truth lies.

CivBase 3y ago
I did no such thing. I only answered the question I was asked. For some reason a bunch of people interpreted that as a defense of short-term stock trading.