The ASR Cryptocurrency thread

[Elkios]

What do you see as the fundamental difference between a stock certificate for a company like Facebook or Twitter and a cryptocurrency like Bitcoin? How about a painting? Collectable cards?

Sure you can argue for some level of intrinsic value... but in the case of the last two it's such a minimal amount in comparison to the "demand premium" as to effectively be zero. Now how about credit default swaps? Or even better, what about uncovered "naked" calls? While the underlying instrument might have some value - the contract itself is literally just a bet with no actual collateral other than a promise.

While you can argue fiscal policy and macroeconomic theory to justify almost anything these days... I think it would be hard (if not impossible) to divorce the ~$15T in consumer debt and ~$22T in federal debt held by the public by various means from our "dominance" and "security". I would argue that our entire economy is a literal ponzi scheme... i.e. that if we don't expand our population and/or number and value of financial instruments at nearly an exponential rate.... then there is nothing but IOU's for the bagholders at the end (which is to say almost all of us).

Thought Experiment:
Think about famous, traditional ponzi schemes and also pyramid membership/sales enterprises. Why do they fail? And very predictably too? Because they are, intrinsically and by definition, doomed by rather simple constraints. As they become successful the need for more contributors accelerates exactly as the availability rapidly diminishes. It's comical as well as tragic. But they always have appeal. And the instigators and early players do indeed get rich. But the instigators and promoters also risk serious criminal liability, imprisonment & loss of all assets. The big problem: when you need exponential growth you run out of people very fast, or too soon anyway. Most people have a clue & might spot one of these schemes and avoid it.
Here is the true genius of crypto currency: It extends the tail almost indefinitely. As it requires more contributors the algorithms exponentially ratchet down the ability to contribute, while making the possibility of gain seem more and more attractive and lucrative and while making the end point ever more difficult to predict, so continually postponing the day of reckoning. It's a cosmic joke. Maybe the best yet, after Eve & the Serpent. If Bernie Madoff knew how to code and considered the possibility of being able to exponentially postpone doomsday he never would have been caught.

Thought Experiment:
Think about famous, traditional ponzi schemes and also pyramid membership/sales enterprises. Why do they fail? And very predictably too? Because they are, intrinsically and by definition, doomed by rather simple constraints. As they become successful the need for more contributors accelerates exactly as the availability rapidly diminishes. It's comical as well as tragic. But they always have appeal. And the instigators and early players do indeed get rich. But the instigators and promoters also risk serious criminal liability, imprisonment & loss of all assets. The big problem: when you need exponential growth you run out of people very fast, or too soon anyway. Most people have a clue & might spot one of these schemes and avoid it.
Here is the true genius of crypto currency: It extends the tail almost indefinitely. As it requires more contributors the algorithms exponentially ratchet down the ability to contribute, while making the possibility of gain seem more and more attractive and lucrative and while making the end point ever more difficult to predict, so continually postponing the day of reckoning. It's a cosmic joke. Maybe the best yet, after Eve & the Serpent. If Bernie Madoff knew how to code and considered the possibility of being able to exponentially postpone doomsday he never would have been caught.

Good for you.

I do wonder.

How many % of people who are in crypto now are like you?

How many % of people who

I think it's a good idea to start a dedicated thread on crypto.
Let's help each other and share helpful info so we could all buy hi end speakers

Interesting what has become of this . Maybe start a new thread for everyone here that would rather end crypto.

 

[julian_hughes]

Crypto is a store of value and a medium of exchange. It's financial technology. I guess we better stop thinking the tech companies aren't producing anything of value because the software that runs our world needs to be built and maintained.

It's a store of value so volatile that it is *useless* as a store of value unless the entire exercise is a gamble/speculation.
It's a medium of exchange so volatile in value, so slow and expensive to exchange that it only makes sense if these huge penalties of volatility and inertia and expense are less onerous than using other well established means which are fast, low cost and stable but not anonymised.

 

[julian_hughes]

Interesting what has become of this . Maybe start a new thread for everyone here that would rather end crypto.

I'm not advocating ending it. I also wouldn't advocate ending Texas Hold'em or flipping a coin. Blockchain is an incredible innovation. But the idea that the cryptocurrencies based on it are credible deserves to be tested. After 13 years of existence they have proven to be too slow, expensive to deal with and too volatile in value to replace either cash, or regular bank to bank transfers, or debit/credit card transactions. Unless you are desperate to hide yourself or your activity! Or you are a gambler/speculator. I don't think there should be any law against financial speculation, whether it's in currency or pork bellies or anything else. But when the greatest, most ingenious ponzi scheme ever devised is presented as a wonderful new currency then it deserves to be ridiculed. And it is a ponzi scheme. It fulfills every criterion. The innovation is in the exponentially increasing ratcheting down on the tail which postpones the inevitable in a way that people could not even dream of before we had relatively easily available computing power. If S. Nakamoto even began to cash out tomorrow then Bitcoin would be dead by the weekend and there would be millions of people holding assets acquired with real money but worth zero. This probably won't happen tomorrow, but it could. And it will happen one day. Will that be this week? Next year? Xmas day? 2099? There are just a handful of people holding huge reserves and the whole thing is only working because they do nothing. That is the top of the pyramid.

 

[Elkios]

I'm not advocating ending it. I also wouldn't advocate ending Texas Hold'em or flipping a coin. Blockchain is an incredible innovation. But the idea that the cryptocurrencies based on it are credible deserves to be tested. After 13 years of existence they have proven to be too slow, expensive to deal with and too volatile in value to replace either cash, or regular bank to bank transfers, or debit/credit card transactions. Unless you are desperate to hide yourself or your activity! Or you are a gambler/speculator. I don't think there should be any law against financial speculation, whether it's in currency or pork bellies or anything else. But when the greatest, most ingenious ponzi scheme ever devised is presented as a wonderful new currency then it deserves to be ridiculed. And it is a ponzi scheme. It fulfills every criterion. The innovation is in the exponentially increasing ratcheting down on the tail which postpones the inevitable in a way that people could not even dream of before we had relatively easily available computing power. If S. Nakamoto even began to cash out tomorrow then Bitcoin would be dead by the weekend and there would be millions of people holding assets acquired with real money but worth zero. This probably won't happen tomorrow, but it could. And it will happen one day. Will that be this week? Next year? Xmas day? 2099? There are just a handful of people holding huge reserves and the whole thing is only working because they do nothing. That is the top of the pyramid.

I think you are missing why the thread was started it is rather clear

 

[julian_hughes]

I think you are missing why the thread was started it is rather clear

First post:

"I think it's a good idea to start a dedicated thread on crypto.
Let's help each other and share helpful info so we could all buy hi end speakers"

I think it's helpful to point out that buying cryptocurrency is a huge gamble and is most likely to make you poorer, not richer and more able to buy hi end speakers. Will this do?

Anyone who bought cryptocurrency on the day the thread was started will have seen it massively devalued. Is that OK to mention?

People promote cryptocurrency as though it has no drawbacks and is a sure fire winner. A few people will make some very nice profits but most people are going to get badly burned. When it goes bad for good it will be so rapid as to be almost instantaneous, and it's not possible to predict when that might be. It doesn't matter what the huge, fabulously multiplied value of your cryptocurrency "investment" might be if you can't move it at reasonable cost, in a timely manner, into actually convertible assets accepted by regulated financial authorities. And nobody even talked about cryptocurrency exchanges yet! They make ponzi schemes look like bona fide charities.

 

[Elkios]

First post:

"I think it's a good idea to start a dedicated thread on crypto.
Let's help each other and share helpful info so we could all buy hi end speakers"

I think it's helpful to point out that buying cryptocurrency is a huge gamble and is most likely to make you poorer, not richer and more able to buy hi end speakers. Will this do?

Anyone who bought cryptocurrency on the day the thread was started will have seen it massively devalued. Is that OK to mention?

People promote cryptocurrency as though it has no drawbacks and is a sure fire winner. A few people will make some very nice profits but most people are going to get badly burned. When it goes bad for good it will be so rapid as to be almost instantaneous, and it's not possible to predict when that might be. It doesn't matter what the huge, fabulously multiplied value of your cryptocurrency "investment" might be if you can't move it at reasonable cost, in a timely manner, into actually convertible assets accepted by regulated financial authorities. And nobody even talked about cryptocurrency exchanges yet! They make ponzi schemes look like bona fide charities.

 

[Elkios]

There are multiple altcoin's that multiplied from the day this thread commenced . Go and research . Sandbox is a start .

 

[Elkios]

There are multiple altcoin's that multiplied from the day this thread commenced . Go and research . Sandbox is a start .

Exchanges in Australia . We can sell and have $ in a regular bank account in under an hour .

 

[julian_hughes]

There are multiple altcoin's that multiplied from the day this thread commenced . Go and research . Sandbox is a start .

Go and research. Is that an order? Are some of them not based on exponentially ratcheting the tail? Do you think saying "altcoin" instead of cryptocurrency makes the others essentially different? Would it not be the case that if even one of these cryptocurrencies fulfilled its purpose then all the others would be immediately redundant? And if that does ever happen then God help you if you converted real assets into the old ones

 

[Elkios]

This thread title again .

 

[julian_hughes]

Exchanges in Australia . We can sell and have $ in a regular bank account in under an hour .

Yes, while there is absolutely minimal demand. BTW people can move other financial instruments in fractions of a second.

 

[Elkios]

Yes, while there is absolutely minimal demand. BTW people can move other financial instruments in fractions of a second.

Your point is? Is cryptocurrency only to be discussed by people who seek to promote it? That would be marketing or perhaps religion.

If every crypto investor could hear you and sold out of fear .

 

[Elkios]

If every crypto investor could hear you and sold out of fear .

I suggested starting another thread for the against .

 

[julian_hughes]

I suggested starting another thread for the against .

Yes, it's important for the success of any bona fide endeavour that only positive things should be said about it and that anybody who disagrees or questions should be quarantined. That's the hard test isn't it? After all, it's only people's money.

I forgot the sarcasm tags

 

[julian_hughes]

If every crypto investor could hear you and sold out of fear .

They won't be able to. Only the first few will be able to, and only briefly. Everybody else is going to be royally screwed.

 

[mansr]

I suggested starting another thread for the against .

Because segregation has always worked out so well in the past.

 

[JanesJr1]

Crypto's no different from any other financial asset. Value depends on how it's used, not what it is.

I agree and it's worth parsing what you mean by "financial asset" in determining crypto's value.

If you mean cryptocurrency is a financial utility, enabling entrepreneurs and governments to redefine payment methods, then there is both good and drek. E.g. China has a multi-decade plan to convert ALL of its currency to crypto and to promote it as replacement for the dollar in international finance.

However, if by "financial asset" you mean an investment, then, well, it's not an investment, it's a wild speculation in most cases. Unless the value is tied to some predictable flow of real-world financial returns or to some index of real-world currency values or commodity prices, then the particular crypto has no definable value. I say that as a career financial advisor. I have been reading about crypto for years, and no-one can provide a cogent explanation of Bitcoin's value, other than it's what everyone else thinks it is on this particular day of the week. If you speculate in Bitcoin, you're either lucky or you're not. (There are other crypto's that have built-in stablilizers, but not Bitcoin. Governments in particular need to anchor the value of their currencies to make them a credible medium of exchange.)

 

[Elkios]

Because segregation has always worked out so well in the past.

Goodluck to all in future financial ventures I'm out of this thread.

 

[HiFidFan]

I suggested starting another thread for the against .

Why should that be required? Is this thread not enough to include both sides of the argument?

 

[TheBatsEar]

...and now I want to read Cryptonomicon again.

It surely is a spicy book.