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It was well stated, and I'm glad to see Vanguard explicitly stating the lack of inherent economic value as part of their reasoning. It's actually worse than th

It was well stated, and I'm glad to see Vanguard explicitly stating the lack of inherent economic value as part of their reasoning. It's actually worse than that, since creating cryptocurrency requires investment of things of real inherent value (capital investment, energy, etc) but only provides a purely speculative asset as an output. Cryptocurrency is basically an economic sink.

lelandfe 2y ago
Satoshi Nakamoto is actually a Trisolaran alien who came to Earth to hasten climate change and have humanity kill off itself.
- koakuma-chan 2y ago
  Every civilization reaches a point where they invent cryptocurrencies, burn through all their resources mining imaginary coins, and that's why the universe is so quiet.
  - antiraza 2y ago
    The universe is a dark mint.
  - oblio 2y ago
    Hey, at least they're not making paper clips.
  - ryandvm 2y ago
    "Crypto is one of the great filters" is a hilarious take.
- mistercheph 2y ago
  How much energy are we spending to try to summon stochastic parrot but world-ending doomsday edition?
  - 1659447091 2y ago
    Two wrongs does not a right make
loandbehold 2y ago
Exactly. Capital investment is a positive sum game. E.g. you build a factory and over its lifetime it produces more than what was the cost to build it. That's the root of economic growth. Bitcoin is a negative sum game. All money that has even been invested into Bitcoin - total cost of mining = all money that investors will ever get back.
- rvnx 2y ago
  They will get the money back, but only if they can manage to keep convincing new people to inject new money. Which is what they are doing now.
  - bqmjjx0kac 2y ago
    Isn't that the definition of a Ponzi scheme?
    - miohtama 2y ago
      It's a definition of a pension fund.
      - throw310822 2y ago
        Or shares: they have a value as long as someone else is willing to buy them. Or just like any other type of transferrable representation of value, including precious metals.
        rsynnott 2y ago
        Shares have a value beyond that, though; they are a share in an actual company, which has assets and generates revenue (hopefully; granted if you’re buying shares in some SPAC merger that might one day produce a flying car or something, that’s not a million miles away from bitcoin). There is a price floor. One might reasonably argue that nvidia is not worth $3.4 trillion (its current market cap), say, but it is clearly worth _something_, even valued purely on assets and yield. Bitcoin has no floor; you are entirely dependent on other people buying it from you for more than you bought it for, because they believe that someone will one day buy it from _them_ for more than _they_ bought it for.
beepbopboopp 2y ago
It's unpopular but, crypto as it exists looks a lot like sports betting with "prop bets" "Futures bets" and "lines." They basically. found a way to sell sports betting to STEM people.
- pavlov 2y ago
  There’s a tremendous market for gambling disguised as something more intellectually and morally palatable.
  - nradov 2y ago
    I'm sure there are a new wave of stealth startups furiously working on schemes to turn real estate investing into something closer to casino gambling. I mean there's already speculation in that asset class but the slow rate of actual transactions makes it less like gambling than stocks / options / currency / commodities. (I'm not saying this will be a good thing, just that it seems like the next logical step in enabling gambling on everything.)
    - rsynnott 2y ago
      I mean, see the last financial crisis. A lot of that was more or less precisely this; activities relating to real estate lending were made more profitable, but riskier (in a way which was poorly understood at the time, though obvious in hindsight). As a result of that financial crisis, real estate is somewhat heavily regulated in most countries, and exotic financial instruments based on real estate (which you’d need to make this work) are treated with suspicion. Probably not the most fertile ground for the aspiring scammer.
      - Ekaros 2y ago
        If a few stories I read were true. The part of the thing was absolutely certainly going to blow up sooner than later. Certain loans were economically impossible.
      - nradov 2y ago
DennisP 2y ago
Proof of stake doesn't require that kind of investment. Ethereum for example has a large decentralized set of validators like Bitcoin, but runs on regular computers with the energy usage of a few hundred average American households. It's similar to any other internet protocol. Economic value is whatever people are willing to pay for, and I do mean "pay for," not "invest in." If you want to use applications on the Ethereum network, you have to pay ETH to do it and the ETH gets burned. As long as people keep doing that, the economic value is demonstrably there. Whether that equates to any other kind of value at this point, I won't try to argue, but for significant periods after proof-of-stake rolled out, ETH has had a P/E comparable to some high-growth stocks. This does not apply to Bitcoin, which doesn't have the burn mechanism or much in the way of applications. ETH and BTC are the two cryptocurrencies with ETFs available. It's unfortunate that even now, so many investment professionals don't understand their differences.
- cryptoegorophy 2y ago
  What I don’t like about eth is when you think extremes and I mean 10000x supply growth of eth or 99.9999% burn all of these are possible scenarios which is not a good idea. Remember how eth forked to save someone’s crypto? Basically defeating the whole idea of crypto currency. Bitcoin on the other hand - hardcoded, meaning supply can’t change.
  - paulryanrogers 2y ago
    There are several serious forks of BTC. The fact that they haven't overtaken the original entirely doesn't make it a good example
  - DennisP 2y ago
    ETH's supply growth without the burn maxes out at about 2% annually, in the case of almost the entire supply being staked. That's still less than major fiat currencies. Its current growth rate is less than Bitcoin's. For the burn to be so extreme, the demand for transaction space would have to be much greater than the space available. Since they're also making large improvements to scaling, with the roadmap going to millions of transactions per second and the hardest parts already done, that also seems unlikely. As for the infamous fork, that happened in Ethereum's first year and it didn't change the ETH supply. Nothing like it has happened in the nine years since. Bitcoin forked when it was eighteen months old, and that actually did change the Bitcoin supply.
akimbostrawman 2y ago
>but only provides a purely speculative asset as an output i would expect this kind of technical ignorance from the news or my mom but not "hackernews". there is real value in exchanging value/currency P2P globally relatively quickly and cheap. you know "internet money" people dreamed about decades ago...
- miohtama 2y ago
  Hacker News ceased to be a news site for hackers and founders years ago and is now a generic discussion forum with all sorts of people with all skill levels and from all political spectrums. Hating cryptocurrency is especially popular here.
- stouset 2y ago
  Next to nobody is actually using it as a means of exchange because it is poorly suited for that purpose in practice. The only type of commerce for which it’s viable in practice are typically crime or crime-adjacent. There is of course a small market of users for “legitimate” and ethically reasonable purposes, but they are by far in the minority. The overwhelming majority of users are holding it as an asset. Which it’s also poorly suited for in the long run: it generates nothing in and of itself and requires constant feeding of money and energy to keep it going. The only way to see a return is to trade it to a greater fool.
  - Animats 2y ago
    > Next to nobody is actually using it as a means of exchange because it is poorly suited for that purpose in practice. The only type of commerce for which it’s viable in practice are typically crime or crime-adjacent. Yes. The size of the money-laundering, exchange control evasion, and tax evasion industry was way underestimated. What surprised me is that after China banned cryptocurrencies in 2021 [1], the price didn't drop. Outside of Bitcoin and Ethereum, almost everything in crypto eventually tanks. The entire NFT market has tanked. Even the big names, such as BAYC, are down. BAYC is down 80% since launch. In memecoin land, "eventually" can be measured in days. Check out TRUMP. Even Ethereum peaked back in 2021. Bitcoin has had 75% drops. If you bought and held anything other than BTC, you're probably under water now. Then there are the constant collapses and "rug pulls".[2] US$76 billion total so far. [1] https://www.bbc.com/news/technology-58678907 https://www.bbc.com/news/technology-58678907 [2] https://www.web3isgoinggreat.com/ https://www.web3isgoinggreat.com/
conradev 2y ago
Gold is an economic sink, too. It is primarily used to preserve capital, even though it has unique atomic properties. Mining gold also takes real inherent value. Gold as a store of capital isn’t accessible to a lot of people, though, because it is easy to steal and thus hard to store. So instead, I can buy a gold ETF. It does make sense that Vanguard doesn’t have a Bitcoin ETF, though: they don’t have a gold ETF either, for the same reason
- tim333 2y ago
  That's not actually true. The biggest use is for jewellery. (see https://www.gold.org/about-gold/gold-demand/by-sector https://www.gold.org/about-gold/gold-demand/by-sector) And largely has been for 4000+ years since ancient Egypt.
  - erikpukinskis 2y ago
    Right, so gold has a financial use and a material use. So, if I were to print bitcoin keys on firewood and sell that, would it become a “good investment” in your mind? That’s basically what gold is. A commodity with some limited material value, whose price has become completely detached from that value due to its use as a financial instrument.

lelandfe 2y ago

Satoshi Nakamoto is actually a Trisolaran alien who came to Earth to hasten climate change and have humanity kill off itself.

koakuma-chan 2y ago
Every civilization reaches a point where they invent cryptocurrencies, burn through all their resources mining imaginary coins, and that's why the universe is so quiet.
- antiraza 2y ago
  The universe is a dark mint.
- oblio 2y ago
  Hey, at least they're not making paper clips.
- ryandvm 2y ago
  "Crypto is one of the great filters" is a hilarious take.
mistercheph 2y ago
How much energy are we spending to try to summon stochastic parrot but world-ending doomsday edition?
- 1659447091 2y ago
  Two wrongs does not a right make

loandbehold 2y ago

Exactly. Capital investment is a positive sum game. E.g. you build a factory and over its lifetime it produces more than what was the cost to build it. That's the root of economic growth. Bitcoin is a negative sum game. All money that has even been invested into Bitcoin - total cost of mining = all money that investors will ever get back.

rvnx 2y ago
They will get the money back, but only if they can manage to keep convincing new people to inject new money. Which is what they are doing now.
- bqmjjx0kac 2y ago
  Isn't that the definition of a Ponzi scheme?
  - miohtama 2y ago
    It's a definition of a pension fund.
    - throw310822 2y ago
      Or shares: they have a value as long as someone else is willing to buy them. Or just like any other type of transferrable representation of value, including precious metals.
      - rsynnott 2y ago
        Shares have a value beyond that, though; they are a share in an actual company, which has assets and generates revenue (hopefully; granted if you’re buying shares in some SPAC merger that might one day produce a flying car or something, that’s not a million miles away from bitcoin). There is a price floor. One might reasonably argue that nvidia is not worth $3.4 trillion (its current market cap), say, but it is clearly worth _something_, even valued purely on assets and yield. Bitcoin has no floor; you are entirely dependent on other people buying it from you for more than you bought it for, because they believe that someone will one day buy it from _them_ for more than _they_ bought it for.

beepbopboopp 2y ago

It's unpopular but, crypto as it exists looks a lot like sports betting with "prop bets" "Futures bets" and "lines." They basically. found a way to sell sports betting to STEM people.

pavlov 2y ago
There’s a tremendous market for gambling disguised as something more intellectually and morally palatable.
- nradov 2y ago
  I'm sure there are a new wave of stealth startups furiously working on schemes to turn real estate investing into something closer to casino gambling. I mean there's already speculation in that asset class but the slow rate of actual transactions makes it less like gambling than stocks / options / currency / commodities. (I'm not saying this will be a good thing, just that it seems like the next logical step in enabling gambling on everything.)
  - rsynnott 2y ago
    I mean, see the last financial crisis. A lot of that was more or less precisely this; activities relating to real estate lending were made more profitable, but riskier (in a way which was poorly understood at the time, though obvious in hindsight). As a result of that financial crisis, real estate is somewhat heavily regulated in most countries, and exotic financial instruments based on real estate (which you’d need to make this work) are treated with suspicion. Probably not the most fertile ground for the aspiring scammer.
    - Ekaros 2y ago
      If a few stories I read were true. The part of the thing was absolutely certainly going to blow up sooner than later. Certain loans were economically impossible.
    - nradov 2y ago

DennisP 2y ago

Proof of stake doesn't require that kind of investment. Ethereum for example has a large decentralized set of validators like Bitcoin, but runs on regular computers with the energy usage of a few hundred average American households. It's similar to any other internet protocol. Economic value is whatever people are willing to pay for, and I do mean "pay for," not "invest in." If you want to use applications on the Ethereum network, you have to pay ETH to do it and the ETH gets burned. As long as people keep doing that, the economic value is demonstrably there. Whether that equates to any other kind of value at this point, I won't try to argue, but for significant periods after proof-of-stake rolled out, ETH has had a P/E comparable to some high-growth stocks. This does not apply to Bitcoin, which doesn't have the burn mechanism or much in the way of applications. ETH and BTC are the two cryptocurrencies with ETFs available. It's unfortunate that even now, so many investment professionals don't understand their differences.

cryptoegorophy 2y ago
What I don’t like about eth is when you think extremes and I mean 10000x supply growth of eth or 99.9999% burn all of these are possible scenarios which is not a good idea. Remember how eth forked to save someone’s crypto? Basically defeating the whole idea of crypto currency. Bitcoin on the other hand - hardcoded, meaning supply can’t change.
- paulryanrogers 2y ago
  There are several serious forks of BTC. The fact that they haven't overtaken the original entirely doesn't make it a good example
- DennisP 2y ago
  ETH's supply growth without the burn maxes out at about 2% annually, in the case of almost the entire supply being staked. That's still less than major fiat currencies. Its current growth rate is less than Bitcoin's. For the burn to be so extreme, the demand for transaction space would have to be much greater than the space available. Since they're also making large improvements to scaling, with the roadmap going to millions of transactions per second and the hardest parts already done, that also seems unlikely. As for the infamous fork, that happened in Ethereum's first year and it didn't change the ETH supply. Nothing like it has happened in the nine years since. Bitcoin forked when it was eighteen months old, and that actually did change the Bitcoin supply.

akimbostrawman 2y ago

>but only provides a purely speculative asset as an output i would expect this kind of technical ignorance from the news or my mom but not "hackernews". there is real value in exchanging value/currency P2P globally relatively quickly and cheap. you know "internet money" people dreamed about decades ago...

miohtama 2y ago
Hacker News ceased to be a news site for hackers and founders years ago and is now a generic discussion forum with all sorts of people with all skill levels and from all political spectrums. Hating cryptocurrency is especially popular here.
stouset 2y ago
Next to nobody is actually using it as a means of exchange because it is poorly suited for that purpose in practice. The only type of commerce for which it’s viable in practice are typically crime or crime-adjacent. There is of course a small market of users for “legitimate” and ethically reasonable purposes, but they are by far in the minority. The overwhelming majority of users are holding it as an asset. Which it’s also poorly suited for in the long run: it generates nothing in and of itself and requires constant feeding of money and energy to keep it going. The only way to see a return is to trade it to a greater fool.
- Animats 2y ago
  > Next to nobody is actually using it as a means of exchange because it is poorly suited for that purpose in practice. The only type of commerce for which it’s viable in practice are typically crime or crime-adjacent. Yes. The size of the money-laundering, exchange control evasion, and tax evasion industry was way underestimated. What surprised me is that after China banned cryptocurrencies in 2021 [1], the price didn't drop. Outside of Bitcoin and Ethereum, almost everything in crypto eventually tanks. The entire NFT market has tanked. Even the big names, such as BAYC, are down. BAYC is down 80% since launch. In memecoin land, "eventually" can be measured in days. Check out TRUMP. Even Ethereum peaked back in 2021. Bitcoin has had 75% drops. If you bought and held anything other than BTC, you're probably under water now. Then there are the constant collapses and "rug pulls".[2] US$76 billion total so far. [1] https://www.bbc.com/news/technology-58678907 https://www.bbc.com/news/technology-58678907 [2] https://www.web3isgoinggreat.com/ https://www.web3isgoinggreat.com/

conradev 2y ago

Gold is an economic sink, too. It is primarily used to preserve capital, even though it has unique atomic properties. Mining gold also takes real inherent value. Gold as a store of capital isn’t accessible to a lot of people, though, because it is easy to steal and thus hard to store. So instead, I can buy a gold ETF. It does make sense that Vanguard doesn’t have a Bitcoin ETF, though: they don’t have a gold ETF either, for the same reason

tim333 2y ago
That's not actually true. The biggest use is for jewellery. (see https://www.gold.org/about-gold/gold-demand/by-sector https://www.gold.org/about-gold/gold-demand/by-sector) And largely has been for 4000+ years since ancient Egypt.
- erikpukinskis 2y ago
  Right, so gold has a financial use and a material use. So, if I were to print bitcoin keys on firewood and sell that, would it become a “good investment” in your mind? That’s basically what gold is. A commodity with some limited material value, whose price has become completely detached from that value due to its use as a financial instrument.