No Bitcoin ETFs at Vanguard (2024)(corporate.vanguard.com)
corporate.vanguard.com
No Bitcoin ETFs at Vanguard (2024)
https://corporate.vanguard.com/content/corporatesite/us/en/corp/articles/no-bitcoin-etfs-at-vanguard-heres-why.html
556 comments
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.
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.
> All money that has even been invested into Bitcoin + total cost of mining = all money that investors will ever get back
Don't you mean "All money that has even been invested into Bitcoin - total cost of mining = all money that investors will ever get back"
Cost of mining has left the system. "Investors" will never get it back.
Don't you mean "All money that has even been invested into Bitcoin - total cost of mining = all money that investors will ever get back"
Cost of mining has left the system. "Investors" will never get it back.
Sorry fixed
This identity (with the minus) would be true if the only things you could do with Bitcoins were create them (at some cost) and then later destroy them for some kind of reward.
Since they can be transferred, it's analogous to saying that the amount of value produced by Visa is equal to negative one times Visa's revenue.
Since they can be transferred, it's analogous to saying that the amount of value produced by Visa is equal to negative one times Visa's revenue.
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.
Which is what they are doing now.
You just wrote an excellent description of the Greater Fool Theory. [0,1]
The greater fool theory argues that prices go up because people are able to sell overpriced securities to a "greater fool," whether or not they are overvalued. That is, of course, until there are no greater fools left. [0]
Crypto technology had potential, but those involved never resolved the critical usability and security issues, and just went straight for killing the golden goose — get the money now and nevermind whether it ever becomes anything. Those now pushing for a "US Strategic Bitcoin Reserve" are attempting to cash out making the rest of the US taxpayers the last Greater Fools, and leave them holding the steaming bag...
[0] https://www.investopedia.com/terms/g/greaterfooltheory.asp
[1] https://en.wikipedia.org/wiki/Greater_fool_theory
The greater fool theory argues that prices go up because people are able to sell overpriced securities to a "greater fool," whether or not they are overvalued. That is, of course, until there are no greater fools left. [0]
Crypto technology had potential, but those involved never resolved the critical usability and security issues, and just went straight for killing the golden goose — get the money now and nevermind whether it ever becomes anything. Those now pushing for a "US Strategic Bitcoin Reserve" are attempting to cash out making the rest of the US taxpayers the last Greater Fools, and leave them holding the steaming bag...
[0] https://www.investopedia.com/terms/g/greaterfooltheory.asp
[1] https://en.wikipedia.org/wiki/Greater_fool_theory
Isn't that the definition of a Ponzi scheme?
Ponzi schemes usually involve promises to get back X times the money after N time. And in terms of actual cash. So whoever runs the Ponzi scheme needs to keep it growing exponentially in order to create exponential payouts. Eventually, it will grow so large that it collapses.
With Blockchains, they are more stable, as there is no such guarantee. Many people choose to HODL instead, and this gives the coin some stability. As long as there is less interest in cashing out than people trying to cash in, the value is growing. And as long as the value is growing, people cash out.
For a Ponzi scheme with guarantees in terms of currencies not minted by the scheme creator, they are bound to collapse sooner or later. Blockchains could go on forever in theory. However, latter still requires more people to cash in than people to cash out. If there is enough people trying to cash out, maybe larger number of people will panic and cash out as well, leading to an avalanche like race to zero.
Both are united by the requirement for a "greater fool", just with Ponzi schemes, this greater fool is exponentially growing while with Blockchains it can grow linearly.
With Blockchains, they are more stable, as there is no such guarantee. Many people choose to HODL instead, and this gives the coin some stability. As long as there is less interest in cashing out than people trying to cash in, the value is growing. And as long as the value is growing, people cash out.
For a Ponzi scheme with guarantees in terms of currencies not minted by the scheme creator, they are bound to collapse sooner or later. Blockchains could go on forever in theory. However, latter still requires more people to cash in than people to cash out. If there is enough people trying to cash out, maybe larger number of people will panic and cash out as well, leading to an avalanche like race to zero.
Both are united by the requirement for a "greater fool", just with Ponzi schemes, this greater fool is exponentially growing while with Blockchains it can grow linearly.
Bitcoin could be more compared to a national currency like Argentinian pesos. The value can go to zero as it is no longer accepted (people do not want it), but there is no inherited promise in the first place it goes up forever.
All it matters that it will stay more stable than other assets. And we know from economic history that assets tied to nations may disappear overnight, e.g. Cyprus.
All it matters that it will stay more stable than other assets. And we know from economic history that assets tied to nations may disappear overnight, e.g. Cyprus.
Unlike pesos, or dollars, Bitcoins can't be printed for free.
And Bitcoin isn't backed by a country's economic output and their military.
And that's the beauty of it. It's strong enough by itself so it doesn't need military protection.
Trump wants to make the Fed, which is supported and defended by the biggest military on this planet, hoard bitcoin. It turns out you can buy politicians with money, and Bitcoin supporters have done just that.
[deleted]
Strictly speaking a Ponzi scheme involves a single person or entity doing that, consciously. Bitcoin is… an anarchist self-organising Ponzi scheme? :) It has many of the features of a Ponzi scheme, but largely by accident; there is no _intent_.
Depends on how many coins the creator owns and when he sells. The creater starts with a few bits in a chain that suddenly are worth billions. When he sells be gets a big chunk of that in Dollars and the value of the rest collapses to zero for everyone trying to sell later.
Yeah, granted, the creator of bitcoin _might_ be, effectively, operating a very complex Ponzi scheme, but it seems unlikely. Occam’s razor says that they were a sincere person or group with unconventional economic theories.
The creators of small memecoins often are doing this, deliberately, of course. Some of them are amazingly open about this, often marketing their memecoins as, essentially, “it’s still early” (ie you, the buyer, get to get in before the scheme collapses; like early Madoff customers, you can be one of the lucky ones!).
The creators of small memecoins often are doing this, deliberately, of course. Some of them are amazingly open about this, often marketing their memecoins as, essentially, “it’s still early” (ie you, the buyer, get to get in before the scheme collapses; like early Madoff customers, you can be one of the lucky ones!).
Eh, crypto is weirder and worse than a Ponzi scheme in a way that deserves its own moniker.
A Ponzi scheme typically involves a small inner circle perpetuating a fraud; even if "everyone knows" it's hinkey, it is ostensibly returning fabulous returns through actual investment/economic activity. Eventually, the insiders stop being able to keep the game going, and go bankrupt, get arrested, flee the country, or some other ignoble end.
Crypto has lost its layer of fraud; it used to be "this thing will be the future of money and therefore have value", but for the last five+ years it's all just been "this will be worth more in the future because people will buy it so you should buy it," a naked Ponzi.
Meanwhile, it is distributed, even if it is highly centralized at every point from mining pools to exchanges. There's no single person who has to go to jail or disappear with his money to collapse the whole system. It's happened dozens of times, and every time it does a new set of criminals steps up to keep the fraud going.
In summary, even if individual enterprises (eg, FTX) are classic Ponzi schemes, crypto as a whole deserves to be the name of its own type of scam.
A Ponzi scheme typically involves a small inner circle perpetuating a fraud; even if "everyone knows" it's hinkey, it is ostensibly returning fabulous returns through actual investment/economic activity. Eventually, the insiders stop being able to keep the game going, and go bankrupt, get arrested, flee the country, or some other ignoble end.
Crypto has lost its layer of fraud; it used to be "this thing will be the future of money and therefore have value", but for the last five+ years it's all just been "this will be worth more in the future because people will buy it so you should buy it," a naked Ponzi.
Meanwhile, it is distributed, even if it is highly centralized at every point from mining pools to exchanges. There's no single person who has to go to jail or disappear with his money to collapse the whole system. It's happened dozens of times, and every time it does a new set of criminals steps up to keep the fraud going.
In summary, even if individual enterprises (eg, FTX) are classic Ponzi schemes, crypto as a whole deserves to be the name of its own type of scam.
Just thinking out loud, but the problem I see is that even if you define Bitcoin as a scam, it could very well have been created by Satoshi Nakamoto (or the group behind the name) in good faith. The real issue now lies with the responsibility of companies like BlackRock to clearly and transparently identify what they are selling to the public.
It is also different than a casino: "Even if crypto investing is considered gambling, there is a factor not present in traditional casino games: the time variable of holding. Holding roulette chips has no effect on their value, while in crypto markets, prices change in time. By holding crypto assets for a longer duration, investors can potentially benefit from market fluctuations and price appreciation, making it a unique aspect compared to classic gambling games." [1].
[1] https://www.coinfabrik.com/blog/the-science-of-crypto-asset-...
It is also different than a casino: "Even if crypto investing is considered gambling, there is a factor not present in traditional casino games: the time variable of holding. Holding roulette chips has no effect on their value, while in crypto markets, prices change in time. By holding crypto assets for a longer duration, investors can potentially benefit from market fluctuations and price appreciation, making it a unique aspect compared to classic gambling games." [1].
[1] https://www.coinfabrik.com/blog/the-science-of-crypto-asset-...
What you say is complete nonsense of the reactionary kind that pervades on this site against crypto, by which at all costs it has to be defined as a scam, against all normal, rational definitions of the word.
If for whatever reason, something my go up in price because there's demand for it despite widely available and mostly correct information about its utility or lack of it, that's not a scam. This is the case with bitcoin. It's growth has fueled interest in a bit of gambling by members of the public about possible future growth. There's no central party running it as something it isn't or perpetuating a core lie by hiding some key information about what bitcoin really is.
People insisting on buying something despite it having an unstable market value and debatable concrete utility doesn't make that thing fraudulent. A scam requires intent and misdirection, regardless of how you and others who share your view try to redefine the word scam arbitrarily. You might as well also call all forms of speculation a scam by the same ridículous logic.
If for whatever reason, something my go up in price because there's demand for it despite widely available and mostly correct information about its utility or lack of it, that's not a scam. This is the case with bitcoin. It's growth has fueled interest in a bit of gambling by members of the public about possible future growth. There's no central party running it as something it isn't or perpetuating a core lie by hiding some key information about what bitcoin really is.
People insisting on buying something despite it having an unstable market value and debatable concrete utility doesn't make that thing fraudulent. A scam requires intent and misdirection, regardless of how you and others who share your view try to redefine the word scam arbitrarily. You might as well also call all forms of speculation a scam by the same ridículous logic.
Thought experiment: what would happen to the price of gold by 2125 AD if nobody born after the year 2025 believed it had value outside of its industrial applications?
See my below comment about 16 Psyche, a 140-miles asteroid made of gold floating out there in the sky. By 2125 AD we'll sure find a way to tow it to our shores.
16 psyche is not made of gold and this reply has nothing to do with my question, in fact, my point would still stand if confidence in gold as a scarce store of value disappeared without any change in supply and it went to ~0 (industrial value)
More likely we would send a team of robots there that would do the trip both ways automatically.
Towing such big asteroid sounds very risky (for the stability of our own planet and of the moon) and expensive, way more than just sending robots.
Towing such big asteroid sounds very risky (for the stability of our own planet and of the moon) and expensive, way more than just sending robots.
It's a definition of a pension fund.
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.
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.
As long as you have a real share, and are not holding an "entitlement" (e.g. a brokerage firm holding your shares in their street name. In that case, you have the right to the economic benefits of the stock, but not the underlying. To do that your name needs to be on the company's ledger. Anyone can request to directly register their shares and hold them directly with the company's transfer agent.
I mean, unless the broker is fraudulent there’s very little practical difference; most people will go with the broker, as it tends to be cheaper. For that matter, most people aren’t investing in individual shares, they’re investing in some sort of mutual fund, so there’s another party that you have to _somewhat_ trust there.
If Bitcoin is a ponzi scheme because of this, then literally every asset which has resale value is a ponzi scheme.
When people buy bonds, stocks, commodities, or purchase a car, a house, or even an Xbox, they are taking into account the resale value of that asset. If you supposed that when you're done with your house, it would be worth $0, you would be willing to pay a lot less for it. There's nothing fundamentally different here wrt Bitcoin.
When people buy bonds, stocks, commodities, or purchase a car, a house, or even an Xbox, they are taking into account the resale value of that asset. If you supposed that when you're done with your house, it would be worth $0, you would be willing to pay a lot less for it. There's nothing fundamentally different here wrt Bitcoin.
A house produces value; you can either rent it out, or live in it (thus avoiding paying rent to someone else). Stocks produce value; the companies make money (and generally either pay dividends, buy back stock, which is just a tax dodge approach to paying dividends, or invest in growth, and will thus eventually be in a position to pay more dividends). Bonds produce value; they are literally loans which (hopefully) get paid back. All of this allows a value to be assigned to them; that value may be greater or less depending on market conditions, demand, future value of money, etc (for instance, if your house is in the middle of nowhere and, by the time you’re done with it, needs a new roof and windows and so on, then its market value may actually approach zero). Things like bitcoin are different in that they do not produce value. You can’t value bitcoin based on X years of expected dividends/quasi-dividends or anything; any value is purely speculative.
To be clear, there’s speculation involved in buying stocks, too, to an extent (particularly buying _individual_ stocks), but ultimately you have a share of some real thing. That is not the case with bitcoin.
To be clear, there’s speculation involved in buying stocks, too, to an extent (particularly buying _individual_ stocks), but ultimately you have a share of some real thing. That is not the case with bitcoin.
What value does gold produce?
Sure, there's some value there, you can use it to make gold-plated contacts or shiny things, but if that was the only use case, it wouldn't be nearly as valuable as it is now.
Gold is valuable because people think it is valuable, and the same hodls true for Bitcoin.
Sure, there's some value there, you can use it to make gold-plated contacts or shiny things, but if that was the only use case, it wouldn't be nearly as valuable as it is now.
Gold is valuable because people think it is valuable, and the same hodls true for Bitcoin.
Gold is probably the closest conventional thing to bitcoin, yes, though it does have _some_ intrinsic value as an industrial material, which sets a floor. But yes, gold’s value is basically speculative, and you’re largely relying on a greater fool.
You also shouldn’t buy gold; over any long period it is almost guaranteed to massively underperform the markets. If you had bought gold at its 1980s peak, you would have been down in real terms ever since; adjusted for inflation it has never reached that value since, and may never do. While you can say that about some individual _companies_, of course, you would be hard pressed to find a major index for which that is the case.
You also shouldn’t buy gold; over any long period it is almost guaranteed to massively underperform the markets. If you had bought gold at its 1980s peak, you would have been down in real terms ever since; adjusted for inflation it has never reached that value since, and may never do. While you can say that about some individual _companies_, of course, you would be hard pressed to find a major index for which that is the case.
> If you had bought gold at its 1980s peak, you would have been down in real terms ever since; adjusted for inflation it has never reached that value since, and may never do. While you can say that about some individual _companies_, of course, you would be hard pressed to find a major index for which that is the case.
The Nikkei 225 comes to mind. It only broke its 1989 peak last year.
The Nikkei 225 comes to mind. It only broke its 1989 peak last year.
You really don't want a financial crisis in banking. All those regulations that crypto folks want to get rid of keep things like what happened to Japan in 1990 from happening with more regularity. Even 2008 in the US was painful and very long recovery, and mortgages were a smallish part of the overall economy.
The claim that we are disagreeing with is that Bitcoin is meaningfully different from any other investment in a way that makes it a Ponzi Scheme. I'm not trying to persuade anyone that it's a good investment, just that it isn't a ponzi scheme any more than gold, oil, real estate etc is.
I don’t think bitcoin is a deliberate Ponzi scheme, but it does have Ponzi scheme-like elements, in particular the absolute dependence on a greater fool to take it off your hands, with value _purely_ being based on what other people imagine it to be worth (ie not backed by any intrinsic value). Gold, yeah, isn’t a million miles away from this, either (as I mentioned previously, historically it is a _bad_ investment) though it does have the benefit of a few millennia of cultural cachet, increasing the chances that there’ll be a greater fool along soon.
Oil and real estate are totally different, though investment in oil in particular _is_ rather speculative; you’re betting on future real demand, but that demand is at least, like, _real_; there are obligate buyers of oil, almost no matter how high the price goes. Real estate, as I previously mentioned, produces value in terms of either rent or not having to pay rent.
Oil and real estate are totally different, though investment in oil in particular _is_ rather speculative; you’re betting on future real demand, but that demand is at least, like, _real_; there are obligate buyers of oil, almost no matter how high the price goes. Real estate, as I previously mentioned, produces value in terms of either rent or not having to pay rent.
The difference is that Bitcoin only has resale value.
The other examples you mentioned generally have some significant additionally value beyond just resale value -- e.g. stocks pay dividends or are expected to at some point, a house is something you can live in or get an income from by renting it out, and so on.
The other examples you mentioned generally have some significant additionally value beyond just resale value -- e.g. stocks pay dividends or are expected to at some point, a house is something you can live in or get an income from by renting it out, and so on.
Bitcoin's use is as a store-of-value. That's it's utility. It has the traits of an ideal store of value. Eventually we may use it as money, but that won't happened until it is much closer to it's ultimate value and the value as stabilised enough to use it as a unit of account.
What happens to a store-of-value asset like gold or cash if you can't convince the next generation to trade another store-of-value-asset, hard asset, or labor for it?
This is precisely why financially literate people hold on to the amount of cash necessary to buy and sell goods, keep some excess in an account that bears interest, and the bulk of the rest goes into productive assets.
Would you like to buy some tulips?
I also have some stamps to sell. A real example of collectible that has fallen in value outside few very rare and perfect specimen.
The funny thing is: tulip bulbs were actually a productive asset. You could plant the bulbs to create more of them.
Apparently they're also semi-edible.
https://www.poison.org/articles/tulip-bulb-toxicity-191
https://www.poison.org/articles/tulip-bulb-toxicity-191
Since we are hypothesizing, here is another hypothesis. Crypto, being non-government controlled, maybe be better than the hypothetic alternative: a government ledger, where the central planners decide which economic activity is "good" and which leads to de-banking, and where decisions are made by government-controlled AI. Then this p2p economic liberty is worth the investment.
You’re the only one hypothesizing here. “Crypto isn’t a productive asset and is an energy sink” is a simple and straightforward observation.
But if you’re going to hypothesize things out of thin air, you can give them literally any property you want. That’s hardly interesting.
But if you’re going to hypothesize things out of thin air, you can give them literally any property you want. That’s hardly interesting.
Pencil and paper, two questions "What is money?", "How does a money start?", half an hour in a park
If you think that a public leger on the public internet is somehow not controllable, I have a crypto bridge to sell you.
Crypto is a commodity that is a fraud machine by nature of its trivial transferability. The lack of transfer controls makes it great for a variety of grifts, as demonstrated time and again.
Even without my cynical opinion, Vanguard doesn’t have a heavy commodity focus, and it’s hard to diversify crypto.
Even without my cynical opinion, Vanguard doesn’t have a heavy commodity focus, and it’s hard to diversify crypto.
The new people are also investors, will they get their money back?
Trade is a positive sum gain and Bitcoin makes it easier.
Which trade, specifically, is Bitcoin facilitating in practice?
Darknet marketplaces.
It's responsible for facilitating a ton of fantastic trips amongst myself and friends.
We had extra money. There were some people on the Netherlands with some extra lsd. We swapped using Bitcoin. Value was created.
It's responsible for facilitating a ton of fantastic trips amongst myself and friends.
We had extra money. There were some people on the Netherlands with some extra lsd. We swapped using Bitcoin. Value was created.
I genuinely believe this is a valuable use of cryptocurrencies.
That said, I would wager enormous sums of money that on net, they have been dramatically negative. Once you factor in the vast quantities of energy wasted (even using up energy that would have otherwise gone to waste simply decreases the demand for batteries or competitiveness of other marginal-value uses) and all the funding of crime such as theft, fraud, hitmen, blackmail, money laundering, scams, and so on it’s very hard to see “I was able to get LSD” as compelling.
And I love LSD.
That said, I would wager enormous sums of money that on net, they have been dramatically negative. Once you factor in the vast quantities of energy wasted (even using up energy that would have otherwise gone to waste simply decreases the demand for batteries or competitiveness of other marginal-value uses) and all the funding of crime such as theft, fraud, hitmen, blackmail, money laundering, scams, and so on it’s very hard to see “I was able to get LSD” as compelling.
And I love LSD.
As an example it's much easier and cheaper to send money from a bank account in US into a bank account in another country when you use bitcoin as the rails for this. All of this can be done fully legally, using companies like Strike, Revolut, Relai or similar.
If you ever tried doing international wire or even using Wise, you will definitely appreciate bitcoin.
You're missing the value the Bitcoin network provides in facilitating trade that's illegal or shady.
I don't want to make any moral statement here. I'm just saying that Bitcoin can be positive sum or negative sum. I don't know which is true and I don't know whether it's better or worse for humanity to have a global mechanism for unregulated money transfers. But that's what we have.
I don't want to make any moral statement here. I'm just saying that Bitcoin can be positive sum or negative sum. I don't know which is true and I don't know whether it's better or worse for humanity to have a global mechanism for unregulated money transfers. But that's what we have.
I really hate to be defending cryptocurrency, but doesn't this same argument apply to banks? They don't produce anything either, they just shift made up numbers around.
Banks produce economic services: they provide the structure and liquidity needed to convey value through the rest of the economy.
(A typical form of blockchain apologia is that blockchains also do this. This is true only if you ignore the social and regulatory structure that allows companies and individuals to treat banks as mostly interchangeable assets.)
(A typical form of blockchain apologia is that blockchains also do this. This is true only if you ignore the social and regulatory structure that allows companies and individuals to treat banks as mostly interchangeable assets.)
Loans. They control money supply.
Banks are service providers. They are the middlemen between entities that have money and entities that need money. They make the deal (a loan/mortgage) and then skim some off the top. There is real economic benefits derived from banks.
There are some real economic benefits to Bitcoin as well, but I don't believe they justify the valuation though that's neither here nor there.
There are some real economic benefits to Bitcoin as well, but I don't believe they justify the valuation though that's neither here nor there.
> They make the deal (a loan/mortgage) and then skim some off the top.
Thanks to fractional reserve banking (i.e. institutionalized fraud), they also create new money along the way (i.e. debase the existing currency).
Thus, the amount they're skimming off is even more than one would originally think, since they're charging interest on something they didn't entirely have in the first place (second-order fraud).
That is quite the service being provided. How fortunate we all are!
Thanks to fractional reserve banking (i.e. institutionalized fraud), they also create new money along the way (i.e. debase the existing currency).
Thus, the amount they're skimming off is even more than one would originally think, since they're charging interest on something they didn't entirely have in the first place (second-order fraud).
That is quite the service being provided. How fortunate we all are!
> How fortunate we all are!
I think so.
As someone who makes things, they solve a really important chicken-and-egg problem for me.
i.e. Where does the money needed to make a thing come from before you make it so that you can sell it and make money from selling the thing?
I suppose technically I could risk my money, assuming I have some. But I'd much rather risk the bank's, and I understand that they will charge me for that.
I think so.
As someone who makes things, they solve a really important chicken-and-egg problem for me.
i.e. Where does the money needed to make a thing come from before you make it so that you can sell it and make money from selling the thing?
I suppose technically I could risk my money, assuming I have some. But I'd much rather risk the bank's, and I understand that they will charge me for that.
Creating new money helped propel economies since a long time ago. It has downsides but almost universally countries have agreed that the positives are worth the downsides.
You can say that banks manage risk of lending and charge for that.
Imagine that instead everyone can take a loan from a government without any checks. Soon financial system would collapse as a lot of irresponsible or too optimistic people would take loans for various purposes and those loans wouldn't be paid back. You need an institution that manages it and take the hit of unpaid loans for the system to be stable.
A loan, say, _is something_. You loan money to a company, they use it to build a factory, which produces, in the long run, more economic value than the cost of building it (hopefully). They pay you back, with interest. It’s a somewhat abstract something, but it is still something-by-proxy. This is generally not the case for a cryptocurrency (it might be for a lender dealing _in_ cryptocurrency, though, well, historically those usually turn out to be scams of some sort).
As a very specific example, I can go to a bank with my W-2s and credit history and get a mortgage. That’s a complex and valuable decades-long relationship they’re facilitating.
It's not hard to imagine your tokenized income stream and tokenized assets, algorithmically qualifying you for a defi loan with out need for some guy at a physical desk in a physical building.
Hence it's also not hard to imagine the economic value you attribute to banks, as value eventually accruing to crypto.
One important difference here is I don’t have to imagine a mortgage.
Bitcoin proponents always talk about how it has the potential to do x, y, and z. Okay so do it already.
Bitcoin proponents always talk about how it has the potential to do x, y, and z. Okay so do it already.
Banks provide a service to the economy of connecting people with more money than needed right now (savings) to people with less money than needed right now (loans). They make money in between when this goes well. So I would contend the shifting of numbers around actually does provide a good to the economy
[deleted]
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.
There’s a tremendous market for gambling disguised as something more intellectually and morally palatable.
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.)
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.
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.
That was something a little different. Degenerate gamblers don't want to wait months or years to see if their bets hit. If someone is going to turn real estate into outright gambling then they'll have to find a way to accelerate the cycle time.
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.
And there’s a lot of people to prey on who don’t understand the difference between day trading and investing.
If you think crypto is only with STEM you're woefully out of touch. I'd wager the adoption and continued interest in crypto is actually lower among STEM than many other professional circles.
STEM people might have been early adopters for crypto as a currency, but are they really the main people speculating, these days?
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
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
That's not actually true. The biggest use is for jewellery. (see https://www.gold.org/about-gold/gold-demand/by-sector) And largely has been for 4000+ years since ancient Egypt.
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.
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.
Satoshi Nakamoto is actually a Trisolaran alien who came to Earth to hasten climate change and have humanity kill off itself.
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.
How much energy are we spending to try to summon stochastic parrot but world-ending doomsday edition?
Two wrongs does not a right make
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.
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.
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.
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.
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.
There are several serious forks of BTC. The fact that they haven't overtaken the original entirely doesn't make it a good example
>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...
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...
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.
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.
> 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
[2] https://www.web3isgoinggreat.com/
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
[2] https://www.web3isgoinggreat.com/
You and everybody else in the replies talk about BTC specificly while I and OP are about cryptocurrency in general. BTC does indeed suck as a currency.
For Vanguard's customer base, this is quite true though. They have access to easy avenues for exchange in the form of USD and other assets.
There is some value for those without access to stable currencies in their home country, but that use case is absolutely dwarfed by the other use cases out there at the moment. Perhaps this will change if the US goes through an economic collapse due to bad tariffs or something.
There is some value for those without access to stable currencies in their home country, but that use case is absolutely dwarfed by the other use cases out there at the moment. Perhaps this will change if the US goes through an economic collapse due to bad tariffs or something.
And yet that's not what we have. Bitcoin, the most popular cryptcoin in the world, is far from quick and cheap to exchange...especially during times of volatility. That dream of "internet money" is just a fantasy to lure potential bag holders.
> Bitcoin, the most popular cryptcoin in the world, is far from quick and cheap to exchange
Compared to what?
Let’s say your goal is to get some wealth out of Tibet into India.
Is it “quick and easy” to do that with dollars? Or Yuan? How about gold bricks? Maybe goats?
I’m not sure what the Chinese authorities at the border would have to say about those things.
With Bitcoin you can memorize a phrase like “witch collapse practice feed shame open despair creek road again ice least” and with that information in your brain you can move any amount of money anywhere your brain can go.
That is one _utility_ of Bitcoin. Just like one _utility_ of a dollar bill is I can put it in a Coke machine.
Compared to what?
Let’s say your goal is to get some wealth out of Tibet into India.
Is it “quick and easy” to do that with dollars? Or Yuan? How about gold bricks? Maybe goats?
I’m not sure what the Chinese authorities at the border would have to say about those things.
With Bitcoin you can memorize a phrase like “witch collapse practice feed shame open despair creek road again ice least” and with that information in your brain you can move any amount of money anywhere your brain can go.
That is one _utility_ of Bitcoin. Just like one _utility_ of a dollar bill is I can put it in a Coke machine.
"Committing crimes is easier with bitcoin," is an interesting argument.
A crime can be just about anything that the current government doesn't like, for any reason.
The first thing that many governments will do when a protest of any kind starts becoming too effective is to make it a crime to participate or support the protest. I think we should all keep this scenario in mind when discussing what the future of our financial system should look like.
It's foolish to gloss over the word "crime" like it only describes human trafficking and international drug trade, especially with everything going on in the US. What was "going to the doctor" yesterday could be "committing a crime" tomorrow.
The first thing that many governments will do when a protest of any kind starts becoming too effective is to make it a crime to participate or support the protest. I think we should all keep this scenario in mind when discussing what the future of our financial system should look like.
It's foolish to gloss over the word "crime" like it only describes human trafficking and international drug trade, especially with everything going on in the US. What was "going to the doctor" yesterday could be "committing a crime" tomorrow.
And in your hypothetical scenario, how did you get that value into Bitcoin to begin with?
Insofar as cryptocurrency is valuable for this at all, it’s really more stablecoins than bitcoin. And even then the concept predates crypto; notably, there’s the Eurodollar (not to be confused with euros or dollars) which is a stablecoin-like thing which has many of the same applications (though a more limited scope).
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.
While I’m not a fan of crypto, I don’t really understand how bitcoin is different from other commodities.
Would you say gold’s value is determined mostly by its practical use? Because it seems demand is largely driven by speculation as an alternative currency.
Would you say gold’s value is determined mostly by its practical use? Because it seems demand is largely driven by speculation as an alternative currency.
Gold has a commodity value above zero. It’s used industrially. Even if everybody decides it’s not worth its precious metal value, it’s not worthless. Bitcoin has zero intrinsic value. None.
Which makes it better. Using gold as a store of value is inefficient. Only 11% of gold is used industrially, 89% of gold is literally wasted in financial games where bitcoin or any other fiat store of value with low supply inflation could be used instead.
My wife can't wear a bitcoin. She can wear a gold necklace and will be pleased to do it even if the price goes to 10%
What’s better: someone’s wife wearing a gold necklace, or a gold ignot sitting idle in Fort Knox?
What’s better: someone living in a house, or a house sitting idle as a store of value?
What’s better: someone storing his wealth in houses and gold ignots, or in special financial assets that don’t take away products from other people?
What’s better: someone living in a house, or a house sitting idle as a store of value?
What’s better: someone storing his wealth in houses and gold ignots, or in special financial assets that don’t take away products from other people?
Would she be happy to wear a necklace that appeared identical to gold to the naked eye, but anyone with a $10 instrument could demonstrate was not gold but something relatively worthless? If so, I have something I would like to sell you that your wife would really love.
I doubt she would be too pleased with the green stain left behind when taken off
Doesn’t the appeal of gold as jewelry rely on it being expensive? I think if the price cratered its use in jewelry would probably plummet.
It's the look. You also get resin / rock / clay / steel / ... (anything really) jewellery. It's not just about the price. And even then, a jewelry-sized gold piece is quite cheap.
Yes, using gold as a store of value is inefficient. You would generally expect returns worse than global equity markets over any significant period of time. You are at significant risk of _losing_ most of your money (adjusted for inflation, gold has never returned to its 80s peak, and was _much_ lower for most of the last 40 years). ~No-one should be investing in gold.
And bitcoin is even _worse_ than gold, on the fundamentals; gold does have at least have that bit of intrinsic value (plus a few millennia of cultural cachet). Bitcoin has _nothing_.
And bitcoin is even _worse_ than gold, on the fundamentals; gold does have at least have that bit of intrinsic value (plus a few millennia of cultural cachet). Bitcoin has _nothing_.
Industrial uses of gold aren't the only uses of gold. Like it or not, jewelry (among other decorative objects) containing actual gold is an enduring status symbol that is hard to 100% fake, and there is quite a large amount of the world's gold that is used for decorative purposes.
It makes it hard to value Bitcoin.
It's not only almost 100% speculation, it doesn't have much history track record.
Crypto bros need to understand that they aren't the first people to discover a speculation market, and just because they can dream of utility doesn't mean they test if the world wants to treat it as a reality. What they're doing is, from a financial perspective, boring and in many cases outdated.
It's not only almost 100% speculation, it doesn't have much history track record.
Crypto bros need to understand that they aren't the first people to discover a speculation market, and just because they can dream of utility doesn't mean they test if the world wants to treat it as a reality. What they're doing is, from a financial perspective, boring and in many cases outdated.
That's a stupid argument. When someone finds some niche applications of crypto currencies in payment services, or something like that, it's economic value is above zero. But what matters is how close the economic value is to the market value, not whether the economic value is literally zero or not.
The difference is that I can create an infinite number of different block chains and or crypto coins.
I can restart forks of both bitcoin and Ethereum on my laptop at this moment. I can restart 10 forks each. Or 100.
I cannot do that with gold.
I can restart forks of both bitcoin and Ethereum on my laptop at this moment. I can restart 10 forks each. Or 100.
I cannot do that with gold.
Bitcoin holds 57% of total crypto value, Ethereum another 11%, some 15% is in centralized instruments like USDC or XRP, which are not really cryptocurrencies.
In addition to that, there are also 10.5 million altcoins (10000 new are created every day). But all of them together hold just 17% of crypto value. So you can, of course, create another millions of forks, but it won't make a dent in Bitcoin value.
In addition to that, there are also 10.5 million altcoins (10000 new are created every day). But all of them together hold just 17% of crypto value. So you can, of course, create another millions of forks, but it won't make a dent in Bitcoin value.
Sure you can create 10 different blockchains but will those have "stable" value 10 years from now?
In China, it's nearly impossible to invest your assets without friends in the government. The government strictly controls conversion of their currency to non-Chinese currencies. As strange as this sounds, but with cryptocurrencies, you can export value from your country to something more stable.
Same goes for many south american countries.
I still wouldn't invest into Bitcoin or Ethereum but I live in the west where there is the rule of law and one can invest into a large variety of asset classes.
In China, it's nearly impossible to invest your assets without friends in the government. The government strictly controls conversion of their currency to non-Chinese currencies. As strange as this sounds, but with cryptocurrencies, you can export value from your country to something more stable.
Same goes for many south american countries.
I still wouldn't invest into Bitcoin or Ethereum but I live in the west where there is the rule of law and one can invest into a large variety of asset classes.
That's irrelevant. You can choose to speculate with literally anything, not just newly invented crypto currencies or gold. Historically people have speculated with tulips and countless other things. The problem is the missing economic value, not whether you can create similar things. It's irrelevant for the economic value of gold whether new elements can be created or not.
> The difference is that I can create an infinite number of different block chains and or crypto coins.
Yes, but Russian Federation uses only one to evade sanctions.
Yes, but Russian Federation uses only one to evade sanctions.
>When someone finds some niche applications of crypto currencies in payment services, or something like that, it's economic value is above zero.
No it isn't. My credit card has an intrinsic value of zero. It might even be negative due to the massive amounts of infrastructure necessary to run it, similarly to bitcoin. The value is in the networks surrounding it, not whatever method Visa uses to move the bits around, be it blockchain, databases, or whatever. And even then, Visa's value add is only a few points on the transaction. It's in no way a speculative asset and if Visa went away tomorrow forever, it would suck for maybe a month while we adjusted to using cash again. In the same vein, if bitcoin went away tomorrow, I wouldn't notice until reading a panicked article about it.
If the US dollar went away tomorrow, however, I'd be happy to have stocked up on ammunition and cured meats.
No it isn't. My credit card has an intrinsic value of zero. It might even be negative due to the massive amounts of infrastructure necessary to run it, similarly to bitcoin. The value is in the networks surrounding it, not whatever method Visa uses to move the bits around, be it blockchain, databases, or whatever. And even then, Visa's value add is only a few points on the transaction. It's in no way a speculative asset and if Visa went away tomorrow forever, it would suck for maybe a month while we adjusted to using cash again. In the same vein, if bitcoin went away tomorrow, I wouldn't notice until reading a panicked article about it.
If the US dollar went away tomorrow, however, I'd be happy to have stocked up on ammunition and cured meats.
How much of gold value is honest commodity value and how much of it is speculative value? I think you will determine speculative value is something above 80%. If that is the case, then arguing that there should be a huge disrecepency between price of BTC and price of gold is intellectually dishonest, since 100% speculative value and 80% speculative value isn't THAT different.
>How much of gold value is honest commodity value and how much of it is speculative value?
It really doesn't matter. The honest commodity value is the same price as the market value. 60+ percent of new gold mined every year goes towards jewelry and electronics. The base price of gold is high due to demand, not due to speculation. Gold is pretty and pretty hard to find - thus the price goes up.
It really doesn't matter. The honest commodity value is the same price as the market value. 60+ percent of new gold mined every year goes towards jewelry and electronics. The base price of gold is high due to demand, not due to speculation. Gold is pretty and pretty hard to find - thus the price goes up.
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I agree about Bitcoin, but other cryptocurrencies like Ethereum or Solana have use as gas to power transactions on their respective networks. So it's interesting to see Vanguard nix those two as well and then say "We do have a lot of interest in blockchain, the technology behind cryptocurrencies. We believe its application to a number of other uses besides crypto will make capital markets more efficient, and we’ve been actively involved in research to use blockchain technology."
Bitcoin has transaction fees too, that's all gas really is, doesn't really change the fundamentals of the system.
It does, but Bitcoin's transaction fees are just paid to the miners. On Ethereum they are mostly destroyed. Combined with the lower issuance of proof-of-stake, this means that the supply of ETH sometimes actually shrinks.
That makes ETH is comparable to shares of a company, where fees are revenue, new issuance to stakers is cost, and any net profit is paid out to ETH holders in the form of stock buybacks. You can calculate a PE ratio.
That makes ETH is comparable to shares of a company, where fees are revenue, new issuance to stakers is cost, and any net profit is paid out to ETH holders in the form of stock buybacks. You can calculate a PE ratio.
Yes, but BTC can only be used as gas to power the transfer of gas. Meanwhile, ETH can be used as gas to power the storage and indexing of information on world computer. If we're talking about creating underlying value, I feel like the former is tautological and latter has an application outside of itself.
True, but you can do a much richer set of transactions with Ethereum/Solana, like moving stablecoins and making collateralized borrows, including against real world (tokenized) assets.
Bitcoin has no intrinsic value. It is not backed by anything real.
Gold has its uses. It’s a pretty metal and has practical uses in engineering and medicine.
It has been a choice for jewelry for thousands of years.
Gold has its uses. It’s a pretty metal and has practical uses in engineering and medicine.
It has been a choice for jewelry for thousands of years.
Paper bills, or “fiat” money, also have no intrinsic value.
Using paper money has already defined you as a participant in accepting the societal construct of money.
As such, Bitcoin having no intrinsic is not novel or consequential and has no bearing on its utility.
Using paper money has already defined you as a participant in accepting the societal construct of money.
As such, Bitcoin having no intrinsic is not novel or consequential and has no bearing on its utility.
Well, I mean (a) it is unwise to accumulate a big pile of paper money (or the equivalent in a bank), like a common Disney duck plutocrat; if you do this, you will in the long run lose money in real terms. By design. Money (or at least modern money; things were somewhat different in persistently-deflationary pre-industrial economies) is not designed for investment. Money should not be the comparison; it’s a tool, not an investment vehicle.
But (b) money is given some real grounding by states; you can pay tax with it, in particular. It’s not much, and it’s not bulletproof, but by comparison to cryptocurrency, well, it’s _something_.
But really, it makes no sense as an argument that hoarding cryptocurrency is a good idea, because hoarding _money_ is, notoriously, a _bad_ idea.
But (b) money is given some real grounding by states; you can pay tax with it, in particular. It’s not much, and it’s not bulletproof, but by comparison to cryptocurrency, well, it’s _something_.
But really, it makes no sense as an argument that hoarding cryptocurrency is a good idea, because hoarding _money_ is, notoriously, a _bad_ idea.
Modern money has operated as you describe for less than one human lifetime. It might not work long-term, and indeed there are significant reasons for worry that it won't. Not that it _can't_ in principle, but that it _won't_ due to mismanagement and misaligned political incentives. A future alternate system might well have deflationary characteristics.
If you mean Bretton Woods, that is in many ways an implementation detail. Ignoring the Great Depression (which probably _should_ be treated as a special case), and brief (~1 year) shocks after WW1 and 2, the last time the US, to take an example, saw _persistent_ deflation was the late 19th century.
Fiat currencies have value because you have to pay your taxes with it. There’s no choosing not to participate.
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> Gold has its uses. It’s a pretty metal and has practical uses in engineering and medicine.
Would you say gold’s value is determined mostly by its practical use? Because it seems demand is largely driven by speculation as an alternative currency.
Would you say gold’s value is determined mostly by its practical use? Because it seems demand is largely driven by speculation as an alternative currency.
It’s practical use both increases demand and removes the commodity from the market.
BTC is more volatile than gold.
BTC is more volatile than gold.
>> Commodities are real assets that meet consumption needs
Granted a commodity's value may be driven by speculation, but at the end of the day it's a material that is consumed by various industries.
Granted a commodity's value may be driven by speculation, but at the end of the day it's a material that is consumed by various industries.
This will not be an argument but my perspective as an amateur investor.
Main difference between gold and bitcoin is in its history. Gold as a type of investment instrument has already earned its reputation and status. It’s not just a commodity, it’s a financial instrument that had its use in building and making of history and it’s well integrated, recognized and supported by most government and societies.
We still don’t know what Bitcoin really is and how it behaves. It could be valued 10k times up or down next year and there could be no clear reason why that happened. Bitcoin is not in hands of most powerful companies, people and governments and change of its value would not affect anything but net worth of certain individuals or organizations.
By no means, I think bitcoin is here to stay and it has a very clear future as an investment and payment instrument. But I think it’s really silly to say Bitcoin is speculative as much as other investment instruments.
Main difference between gold and bitcoin is in its history. Gold as a type of investment instrument has already earned its reputation and status. It’s not just a commodity, it’s a financial instrument that had its use in building and making of history and it’s well integrated, recognized and supported by most government and societies.
We still don’t know what Bitcoin really is and how it behaves. It could be valued 10k times up or down next year and there could be no clear reason why that happened. Bitcoin is not in hands of most powerful companies, people and governments and change of its value would not affect anything but net worth of certain individuals or organizations.
By no means, I think bitcoin is here to stay and it has a very clear future as an investment and payment instrument. But I think it’s really silly to say Bitcoin is speculative as much as other investment instruments.
>We still don’t know what Bitcoin really is and how it behaves
We know both of those things 100%, it's in the source code and ledger of every transaction that has ever occurred from it's inception. We certainly do NOT know that in regards to gold, nobody has a good picture of the world's total gold reserves and where they are, the extraction rate, or it's exchange. A lot of what people say is true of bitcoin but not of gold seems to be precisely the opposite.
As far as what should bitcoin's utility be valued at to the world at large, sure this is in a volatile state, but I don't see how that bears on it's classification as an asset.
As far as what should bitcoin's utility be valued at to the world at large, sure this is in a volatile state, but I don't see how that bears on it's classification as an asset.
Gold is also not like other commodities. No one treats gold the way you treat iron or lithium or even platinum/palladium.
And for what it's worth, Vanguard doesn't have a pure gold ETF.
And for what it's worth, Vanguard doesn't have a pure gold ETF.
Besides practical use, gold also has aesthetic use: jewelry, as an external status symbol of wealth. That is not possible for crypto currencies in the same way. Of course as online presence and social structures mature, this might change. Maybe not in my generation’s lifetime, but who knows.
Im hate crypto as much as the next person, but is jewelry as a status symbol that different from an NFT as a status symbol or having a bitcoin wallet worth $1mil as a status symbol?
People in CS:GO pay (tens) of thousands of dollars for skins which are just digital status symbols.
Maybe the property of gold is that it is a status symbol which has a long history and cannot be duped.
People in CS:GO pay (tens) of thousands of dollars for skins which are just digital status symbols.
Maybe the property of gold is that it is a status symbol which has a long history and cannot be duped.
In general, yes. Jewelry can be melted down and repurposed. It’s also visible in the physical world, which means more to many people today (maybe not to future generations). In that way, I think NFTs are more comparable to, say collectible mechanical watches, baseball cards, stamps, art. It might be worth dollar for dollar to some people, but the market for gold is much larger.
I'm not into gold or crypto but gold jewelry has a tiny bit more of a track record than nfts
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Is a picture of gold jewelry (NFT) worth the same as jewelry?
Gold's fundamentals are it is mined and used for jewellery. Speculation and hoarding can cause it to fluctuate a fair bit but long term the price is driven by the mining cost. See the 200 year inflation adjusted price https://www.marottaonmoney.com/wp-content/uploads/2013/05/st... It's remarkably constant in the long run.
Bitcoin is different. Although it's mined, the mining difficulty constantly adjusts to keep the block time at 10 minutes. The price is set by the people in the market buying and selling it and so fluctuates all over the place.
Bitcoin is different. Although it's mined, the mining difficulty constantly adjusts to keep the block time at 10 minutes. The price is set by the people in the market buying and selling it and so fluctuates all over the place.
I think the unsatisfying answer is that Bogle was a bit of gold bug -- he had a 5% gold allocation.
Gold was historically uncorrelated to other asset classes, so there was a portfolio theory reason to allocate in gold. In times of uncertainty and fear, people would flee to gold. Afaik, this effect has been muted in recent years. I don’t know if it has been fully explained, but it’s likely due to the highly available and interconnected investment products of today.
Bitcoin has been shown to have a high beta with credit and other investment assets. So from a portfolio theory perspective, it is functionally more like a leveraged ETF than a hedge.
This doesn’t mean that neither deserves a place in a modern portfolio. As they say, past returns are no guarantee of future results.
It’s arguably a _bit_ of a myth that people flee to gold in times of uncertainty. It’s something that many people believe happens, and it does seem to happen to _some_ extent, but not to the extent that people believe. Adjusted for inflation, gold has never reached its 1980s peak again, and may never do so, despite a number of greater economic and social shocks since that peak.
So it bubbled and crashed forty years ago. In the past 25 years it's had decent returns, and in particular:
2007: 31.59%, 2008: 3.41%, 2009: 27.63%, 2010: 27.74% [1]
Owning too much gold is terrible, but a modest allocation to gold in a portfolio of mostly stocks, which you rebalance every year or two, works out pretty well. [2]
[1] https://www.macrotrends.net/1333/historical-gold-prices-100-...
[2] https://portfoliocharts.com/2021/12/16/three-secret-ingredie...
2007: 31.59%, 2008: 3.41%, 2009: 27.63%, 2010: 27.74% [1]
Owning too much gold is terrible, but a modest allocation to gold in a portfolio of mostly stocks, which you rebalance every year or two, works out pretty well. [2]
[1] https://www.macrotrends.net/1333/historical-gold-prices-100-...
[2] https://portfoliocharts.com/2021/12/16/three-secret-ingredie...
I mean, each to their own. I don’t understand how anyone can look at that chart, and look at, say, an S&P500 returns chart (or an MSCI World chart if you want some more diversity) and say “yes, gold is a good long-term investment”, but you do you.
(NB. Gold enthusiasts will sometimes try to cloud the waters by comparing gold to, say, S&P500 price only (ie pretending dividends aren’t a thing). This honestly still doesn’t leave gold looking very attractive, but it’s also dishonest. To compare like with like you want to look at S&P500 with dividends reinvested, and at that point gold just isn’t even in the running.)
(NB. Gold enthusiasts will sometimes try to cloud the waters by comparing gold to, say, S&P500 price only (ie pretending dividends aren’t a thing). This honestly still doesn’t leave gold looking very attractive, but it’s also dishonest. To compare like with like you want to look at S&P500 with dividends reinvested, and at that point gold just isn’t even in the running.)
As I wrote above, by itself gold is a terrible investment. But as a small portion of a portfolio that you rebalance periodically, it has its benefits for improving risk-adjusted returns. See my second link for details.
But you can get the gist by observing that in 2008, the S&P500 dropped 38.49%,[1] while gold went up 3%. If you had, say, 10% of your portfolio in gold, then when you did your end-of-year rebalance you got to buy a lot of cheap stock. Gold also substantially outperformed stocks in 2007, 2009, and 2010. So I'm not convinced it's a "myth that people flee to gold in times of uncertainty." Maybe you're right that it's not as big an effect as some people believe, but it's enough to benefit your portfolio.
[1] https://www.macrotrends.net/2526/sp-500-historical-annual-re...
But you can get the gist by observing that in 2008, the S&P500 dropped 38.49%,[1] while gold went up 3%. If you had, say, 10% of your portfolio in gold, then when you did your end-of-year rebalance you got to buy a lot of cheap stock. Gold also substantially outperformed stocks in 2007, 2009, and 2010. So I'm not convinced it's a "myth that people flee to gold in times of uncertainty." Maybe you're right that it's not as big an effect as some people believe, but it's enough to benefit your portfolio.
[1] https://www.macrotrends.net/2526/sp-500-historical-annual-re...
Portfolio theory suggests holding uncorrelated assets and rebalancing. If/when the stock market has a down year, it hopefully softens the drawdown.
> gold has never reached its 1980s peak again, and may never do so
Very true. OTOH, if you bought gold one week, one month, six months, one year, five years, ten years or twenty years ago you would have made money.
I am not really a gold bug. It has a place, but it’s not the best asset ever. As others correctly point out, it is unproductive in itself. OTOH, if you have two uncorrelated assets, you can make money simply by rebalancing periodically between them. Not a lot of money, but not nothing.
Note too that cash itself is unproductive. Dollars ultimately derive their value from the fact that Americans have to pay their taxes in them, not because pieces of linen paper are useful for a lot.
Very true. OTOH, if you bought gold one week, one month, six months, one year, five years, ten years or twenty years ago you would have made money.
I am not really a gold bug. It has a place, but it’s not the best asset ever. As others correctly point out, it is unproductive in itself. OTOH, if you have two uncorrelated assets, you can make money simply by rebalancing periodically between them. Not a lot of money, but not nothing.
Note too that cash itself is unproductive. Dollars ultimately derive their value from the fact that Americans have to pay their taxes in them, not because pieces of linen paper are useful for a lot.
> OTOH, if you bought gold one week, one month, six months, one year, five years, ten years or twenty years ago you would have made money.
Well, yes, but that's a rather unusual condition (the last time that would have been true would have been for a period in 2011, and before that for like a day or two in early 1980).
By contrast if you'd bought a broad index fund you'd have made a lot _more_ money (except for the one week example, due to Nvidia shitting the bed today). Like, a _lot_ more money.
> Note too that cash itself is unproductive.
Sure; approximately no-one will argue with you on that one. But cash isn't really the alternative to gold.
Well, yes, but that's a rather unusual condition (the last time that would have been true would have been for a period in 2011, and before that for like a day or two in early 1980).
By contrast if you'd bought a broad index fund you'd have made a lot _more_ money (except for the one week example, due to Nvidia shitting the bed today). Like, a _lot_ more money.
> Note too that cash itself is unproductive.
Sure; approximately no-one will argue with you on that one. But cash isn't really the alternative to gold.
If all you give me is leveraged beta I can replicate that more cheaply.
I honestly don't know how much of gold's value is driven by practical uses rather than speculation, but I think there's an important difference between "some practical use" and "no practical use" when it comes to commodities. The practical uses mean gold is unlikely to ever be worthless, but the same can't be said for a cryptocurrency.
Even from a speculative standpoint, gold or similar commodities have the advantage of being actually support limited. Now obviously the supply of an individual cryptocurrency can be limited, such as with Bitcoin, but the supply of cryptocurrency in general is essentially unlimited with very little barrier to entry. That's not great for even speculative investment, since you're essentially betting on the continued popularity of whatever currency you invested in with relatively little history to support that trend.
Even from a speculative standpoint, gold or similar commodities have the advantage of being actually support limited. Now obviously the supply of an individual cryptocurrency can be limited, such as with Bitcoin, but the supply of cryptocurrency in general is essentially unlimited with very little barrier to entry. That's not great for even speculative investment, since you're essentially betting on the continued popularity of whatever currency you invested in with relatively little history to support that trend.
Does it really matter if the value of something is 95% speculative or 100%? Loosing 95% of the value of your investment is not a lot different than 100%.
Bitcoin is certainly extremely high on the speculative spectrum, but claiming gold is anywhere near the same level of speculation is specious.
Gold has the Lindy effect going for it. Humans have been trading it for thousands of years. Bitcoin has been around for 16 years.
Gold has industrial uses and if its value dropped, its uses would expand. Bitcoin has no such inherent supply-demand curve.
Gold has the Lindy effect going for it. Humans have been trading it for thousands of years. Bitcoin has been around for 16 years.
Gold has industrial uses and if its value dropped, its uses would expand. Bitcoin has no such inherent supply-demand curve.
I like gold and bitcoin. But productive assets seem more useful to hold in general. Fiat, gold, and bitcoin are debt tokens on future humans. I'd rather own things than future human labor. Feels a bit like owning people.
Taking an investment position in a commodity vs a speculative position indeed could raise some non-trivial questions (if you believe in/subscribe to some sort dichotomy there).
I seem to remember in the past, commodity investments where viewed with an eye towards diversification benefits, for example.
I seem to remember in the past, commodity investments where viewed with an eye towards diversification benefits, for example.
an alternative currency because humans have a long history of treating it as a valuable item, mostly for jewelry / decorative purposes.
crypto only copied the speculative currency part, but it's not useful even for showing off...
You can't eat or burn bitcoin, therefore doesn't need to be balanced or made sustainable through economical instruments.
You know all those economical instruments? They actually serve a purpose(like making the price stable or making the supply and demand predictable. This is important because it usually takes months to years to produce these things and you don't want to destroy your producers or production capacity for a glitch) and they're not just a gambling machine with strength rules.
You know all those economical instruments? They actually serve a purpose(like making the price stable or making the supply and demand predictable. This is important because it usually takes months to years to produce these things and you don't want to destroy your producers or production capacity for a glitch) and they're not just a gambling machine with strength rules.
>[economical instruments are] not just a gambling machine
Oh really? With stock buybacks, splits, and options, financial trickery, and market cap not matching production?
There are lots of forces in the market that make it very much a gambling machine. For example SMCI produces very real things, I've owned hundreds of their products, but some questionable decisions resulted in a huge drop despite them being well positioned for all the AI growth. Or TSLA, which has recently doubled from a point where many felt the stock price didn't match the available market.
Oh really? With stock buybacks, splits, and options, financial trickery, and market cap not matching production?
There are lots of forces in the market that make it very much a gambling machine. For example SMCI produces very real things, I've owned hundreds of their products, but some questionable decisions resulted in a huge drop despite them being well positioned for all the AI growth. Or TSLA, which has recently doubled from a point where many felt the stock price didn't match the available market.
The point is that their reason for existence isn't gambling. It wouldn't be surprising if more rules and restrictions are introduced if they end up not being able to serve their core purpose.
Don't take this the wrong way, but the way you say "their core purpose" makes me think that you agree that their reason for existence isn't gambling. I'd agree that they haven't lived up to their core purpose as much as they could have, and it's a lot gambling
Not functioning as intended is different than the original intentions and it is important when arguing for one more function.
Full disclosure: I've probably "lost" more by following advice like this article than everybody on this thread has lost on bitcoin.
Gold looks nice, golden jewelry can be beautiful. This is not going to ever change. Even if it does, gold's ductility and chemical resistance will still be important for industrial applications.
And the scarcity of gold is not likely to decrease in the near future, unlike with diamonds that can now be cheaply manufactured and bought on AliExpress.
And the scarcity of gold is not likely to decrease in the near future, unlike with diamonds that can now be cheaply manufactured and bought on AliExpress.
Other commodities have a physical existence. That's quite a big difference.
Certainly true. Gold is difficult to transport and expensive to protect, whereas Bitcoin is neither.
Indeed. Other commodities have other strengths; oil can be turned into a huge range of products that make people's lives better, wheat can be literally used to make food to radically enhance people's lived experience, aluminium is a key component in an enormous range of goods covering almost every aspect of life. If what Bitcoin can offer isn't having any actual application that improves anyone's life but is easy to move around, well, gotta go with your only strength, I guess.
In India gold demand is driven by its use as jewelry. It is also used as a safe asset that can either be pledged or sold in time of need. This has been the case for hundreds of years if not more.
Gold is also no longer a good thing but still better than crypto.
In an apocalypse gold s still usable and gold has other uses. Like industrial and as jewelry
In an apocalypse gold s still usable and gold has other uses. Like industrial and as jewelry
Gold is also a generally terrible asset to hold as a long-term store of value.
Gold is the single best thing that exists in the world and that has ever existed. That's where the value is.
You seem to have Gold confused with Tacos.
I bought bitcoin, I hate it, I think conceptually it’s really dumb, but the first rule of investment is to diversify. I just can’t ignore the fact that it’s a store of value like gold it is very bizarre why it is prioritized, but it is.
> first rule of investment is to diversify
That does not mean buy anything. Intentionality matters. Diversification is a risk mitigation strategy, but holding bitcoin increases a portfolio’s risk. So if you want to diversify to reduce risk, purchasing bitcoin is the exact opposite of what you want to do.
That does not mean buy anything. Intentionality matters. Diversification is a risk mitigation strategy, but holding bitcoin increases a portfolio’s risk. So if you want to diversify to reduce risk, purchasing bitcoin is the exact opposite of what you want to do.
As the article points out, bitcoin is so volatile that having it as even 5% of your portfolio will "drastically raise its risk profile".
Unless you’re playing around with derivatives, crypto is actually fairly safe. There are price swings but the supply doesn’t magically increase because someone was ordered to print more. Therefore there is always a reasonable expectation that its value will increase over time.
The price swings with crypto are on the demand side. It is completely unsafe because there's no rhyme or reason to its demand, people just following whichever way the crowd goes, in whichever direction, and variously hoping it continues or reverses.
It's not even like gambling on an external event like whether a horse wins -- it's betting on how other people are betting.
There is absolutely no reasonable expectation that its value will increase over time. There's no reasonable expectation of anything because it has no demand-side fundamentals whatsoever.
It's not even like gambling on an external event like whether a horse wins -- it's betting on how other people are betting.
There is absolutely no reasonable expectation that its value will increase over time. There's no reasonable expectation of anything because it has no demand-side fundamentals whatsoever.
>It is completely unsafe because there's no rhyme or reason to its demand, people just following whichever way the crowd goes, in whichever direction, and variously hoping it continues or reverses.
How is this any different to any other security? There's speculation in all markets.
How is this any different to any other security? There's speculation in all markets.
It's different because other securities have a fundamental present value of future cash flows. You expect corporations you buy stocks in will pay dividends and/or be purchased by another corporation that does.
If stocks get too expensive or too cheap from what people's estimation of that present value is, we know a correction will come at some point. It always does.
But with crypto, there's utterly on sense of "too expensive" or "too cheap" or "correction". It's just betting on betting.
Regular securities are fundamental value plus limited speculation. Crypto is purely speculation that is unbounded. Two totally different things.
If stocks get too expensive or too cheap from what people's estimation of that present value is, we know a correction will come at some point. It always does.
But with crypto, there's utterly on sense of "too expensive" or "too cheap" or "correction". It's just betting on betting.
Regular securities are fundamental value plus limited speculation. Crypto is purely speculation that is unbounded. Two totally different things.
No, there is always a reasonable expectation that crypto will crash to near zero.
Crypto valuation is based on the greater fool theory and one day you will run out of fools.
Crypto valuation is based on the greater fool theory and one day you will run out of fools.
If you’ve got a lot of working years left (and therefore can survive losing a large % of assets any given year) it’s generally a good thing to drastically raise your risk profile. Assuming you’re also raising your expected returns.
That was so funny they left out "and returns"
Like, it's valid to point to its historical volatility, but it struck me as intellectually dishonest to say it's been (historically) risky without also acknowledging that holders have (historically) been well-rewarded for their risk appetite. High Sharpe ratio, etc.
Like, it's valid to point to its historical volatility, but it struck me as intellectually dishonest to say it's been (historically) risky without also acknowledging that holders have (historically) been well-rewarded for their risk appetite. High Sharpe ratio, etc.
I mean, diversify, sure, but not into _everything_. Like, there are plenty of old fax machines around, but you probably shouldn’t add any to your portfolio. You have to consider whether the diversification is into something sensible.
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I think they are consistent. They also don’t have an ETF which invests directly in gold.
I never understood the argument against speculation. Many stocks are losing money or do not yet have a working product, so how is speculating on these kinds of stocks any different from speculating on cryptocurrencies?
Vanguard says it's more of a speculation than an investment. Vanguard isn't saying speculation is bad entirely.
Stocks are ownership of a tiny part of a company that has assets, cash flow, and does something in the world. Stocks are a speculation as well, some more than others, but the balance of speculation to investment is weighted differently.
Bitcoin on the other hand is almost always only purchased for speculation that the exchange rate will go in your favor. You don't own a tiny part of anything.
From my perspective, a big issue with Bitcoin speculation is that it's inherently zero-sum. Investing in a company is usually positive-sum (even if it you don't profit).
Stocks are ownership of a tiny part of a company that has assets, cash flow, and does something in the world. Stocks are a speculation as well, some more than others, but the balance of speculation to investment is weighted differently.
Bitcoin on the other hand is almost always only purchased for speculation that the exchange rate will go in your favor. You don't own a tiny part of anything.
From my perspective, a big issue with Bitcoin speculation is that it's inherently zero-sum. Investing in a company is usually positive-sum (even if it you don't profit).
You own a part of a finite pie that people want to have a stake in. So that's not nothing, however speculative it clearly is.
There's a potential for them to produce value. Not the case with crypto.
Ability to send vale across the world, to anywhere, for relatively low fees, could count as providing value, don't you think? A lot of people do.
Bitcoin got labeled just a "store of value", but with Bitcoin Lightning it can be used for low fee payments too.
Pity about mining though, I wish they followed Ethereum into staking. It doesn't matter how much value you provide if you burn the planet along the way.
Bitcoin got labeled just a "store of value", but with Bitcoin Lightning it can be used for low fee payments too.
Pity about mining though, I wish they followed Ethereum into staking. It doesn't matter how much value you provide if you burn the planet along the way.
If it's working as intended then there's no point in holding on to the crypto itself as there should be a race to the bottom to keep fees low. By investing in crypto as a technology you're hoping that the technology becomes popular but remains expensive.
Being a store of value and a medium of exchange provides value by itself.
Yeah but that's the network, not the Bitcoin itself. Money as a system is valuable but that doesn't mean it's worth holding cash.
Blockchains can potentially produce value by receiving transaction fees and burning them. This is similar in some ways to a stock buyback.
Both Ethereum and Solana are currently coded to do this, though AFAIK neither of them are currently cash-positive due to their burned fees not being enough to offset issuance yet.
Both Ethereum and Solana are currently coded to do this, though AFAIK neither of them are currently cash-positive due to their burned fees not being enough to offset issuance yet.
If you’re buying stocks in a company which _doesn’t have a working product_, then, er, yeah, that’s not a million miles away. You probably shouldn’t do that. Arguably those stocks should never have made it onto the public markets; where this happens it’s generally due to SPACs, which arguably should never have been allowed in the first place.
“Losing money” is a bit different; if a company is, deliberately, investing in growth rather than generating a net profit, that _can_ be a _good_ thing, as it implies greater future profits. Amazon, say, _could_ have become profitable far earlier than it did, but it would be a much smaller company if it had. If they’re buying something for $20 and selling it for $10, then yeah, not so much, but again that’s in the class of companies that you should not invest in, that most people do not invest in (they’re not in the major indexes), and that arguably should never have been allowed to float.
When people talk about investing in the markets, they’re usually talking about either investing in an index, or in some approximation of an index (whether through active management or cobbling together their own portfolio of real companies which will generally more or less mirror the top 10 of at least one major index). They’re not talking about buying shares in weird scam companies; _that_ is speculation.
“Losing money” is a bit different; if a company is, deliberately, investing in growth rather than generating a net profit, that _can_ be a _good_ thing, as it implies greater future profits. Amazon, say, _could_ have become profitable far earlier than it did, but it would be a much smaller company if it had. If they’re buying something for $20 and selling it for $10, then yeah, not so much, but again that’s in the class of companies that you should not invest in, that most people do not invest in (they’re not in the major indexes), and that arguably should never have been allowed to float.
When people talk about investing in the markets, they’re usually talking about either investing in an index, or in some approximation of an index (whether through active management or cobbling together their own portfolio of real companies which will generally more or less mirror the top 10 of at least one major index). They’re not talking about buying shares in weird scam companies; _that_ is speculation.
I think it's just not what Vanguard is about if you look at their history.
Aside from that, wouldn't the same train of thought preclude buying overvalued stocks?
Even if BTC was determined to have value, wouldn't the risk of tether be enough to avoid it (if - aside from giving BTC value - speaking from verified facts only. Meaning it's an established FACT that the people who control tether have not proven it is or was ever backed by an equal amount of capital).
Even if BTC was determined to have value, wouldn't the risk of tether be enough to avoid it (if - aside from giving BTC value - speaking from verified facts only. Meaning it's an established FACT that the people who control tether have not proven it is or was ever backed by an equal amount of capital).
Seems like a lot of HN is bitter about not buying a tech-centric in-their-face asset when it first started that they thought about but didn't grab a bag and could have changed their lives from great to giant multi-millionaire. Stonks are traded at some > 40x their company's worth, but somehow's not laughed at on here.
> “Jackson: In Vanguard’s view, crypto is more of a speculation than an investment. […] While crypto has been classified as a commodity […]
While Vanguard isn't against commodities completely (e.g., VCMDX):
* https://investor.vanguard.com/investment-products/mutual-fun...
* https://corporate.vanguard.com/content/dam/corp/research/pdf...
It's not really their thing either.
While Vanguard isn't against commodities completely (e.g., VCMDX):
* https://investor.vanguard.com/investment-products/mutual-fun...
* https://corporate.vanguard.com/content/dam/corp/research/pdf...
It's not really their thing either.
While I agree with the quote, I also believe that Bitcoin can have value as a currency with unique properties. The fact that it is driven by flat hierarchies and is not limited to national borders (decentralized) makes it an asset that could have overall value. Thus it's something people may see as worthwhile and want to invest in, whether for personal financial gain or to support its broader vision.
The modern stock market is largely fuelled by speculation.
Companies don't pay dividends, so even if you have a claim on the underlying cash flow - you aren't really getting it in practice.
Further out, some pieces of equities are so overvalued that you're basically paying for 99% speculation rather than the underlying cash flow.
It's a spectrum.
Companies don't pay dividends, so even if you have a claim on the underlying cash flow - you aren't really getting it in practice.
Further out, some pieces of equities are so overvalued that you're basically paying for 99% speculation rather than the underlying cash flow.
It's a spectrum.
A buyback is functionally equivalent to a dividend except it is more tax efficient. Much of the decline in dividends has been the rise of buybacks.
Buybacks are functionally accepted as an alternative to dividends, but are not really equivalents. An important distinction is that buybacks not only benefit the shareholders like dividends do, but also benefit the perception of the company's performance by boosting per share financial figures, due to less shares remaining following the buyback. This incentivizes the leadership of a company more towards buybacks, as it not only potentially increases the value of their largely stock based compensation, but it also makes their performance look better.
Off topic, but I wish finance sites published "buyback yield" metric or equivalent (what percentage of total stock value was bought back in last quarter / year / TTM. If buybacks are treated as dividends, investors should be able to assess their returns in a similar way, imho.
It's true that the modern stock market is a spectrum ranging from highly speculative "growth stocks" to blue chips / income stocks. Bonds are even further down the safe-claim-to-future-money spectrum.
While your argument is technically correct, there's a world of difference between cryptocurrency where the inherent value is definitionally $0, and stocks/bonds/commodities/real estate where the inherent value is almost always above $0 and can, if you want, be a large percentage of its total price. That allows an investor to determine their own level of speculative risk.
While your argument is technically correct, there's a world of difference between cryptocurrency where the inherent value is definitionally $0, and stocks/bonds/commodities/real estate where the inherent value is almost always above $0 and can, if you want, be a large percentage of its total price. That allows an investor to determine their own level of speculative risk.
Bitcoin is useful commodity, it's used for money laundering, sanction dodging, various criminal activity, etc. It infinitely more useful in modern world than gold for example.
This shows a fundamental misunderstanding of how money works.
Historically all kinds of things have served the role of money. In recent examples, prison environments consistently give rise to people using "commodities" like ramen packs or cigarettes as a unit of money.
The reason why gold has been the choice over most of human kind's history is that it has properties that make it suitable for money. It's scarce. It's difficult to make more of it. It's difficult to fake (until recently). It's easy to "hold". It's durable. But above all, it has a history of social consensus that it is the asset that is globally agreed upon to serve this purpose.
If you think prisoners ascribe value to ramen packs as money because of their ability to eat it, you have a fundamental misunderstanding how money works and how moneyness gets assigned to physical objects.
It's difficult to understand what an introduction of a new type of money looks like, because most people haven't experienced that in their lifetime. That's ok. But as a crowd of people here of who frequently espouse first-principles thinking, it's unfortunate to see people repeatedly falling for the "it has industrial uses" argument for gold. Yes industrial use creates a demand floor and a price floor. But if you think most of the price of gold is driven by it's industrial use then I have a bridge to sell you.
Historically all kinds of things have served the role of money. In recent examples, prison environments consistently give rise to people using "commodities" like ramen packs or cigarettes as a unit of money.
The reason why gold has been the choice over most of human kind's history is that it has properties that make it suitable for money. It's scarce. It's difficult to make more of it. It's difficult to fake (until recently). It's easy to "hold". It's durable. But above all, it has a history of social consensus that it is the asset that is globally agreed upon to serve this purpose.
If you think prisoners ascribe value to ramen packs as money because of their ability to eat it, you have a fundamental misunderstanding how money works and how moneyness gets assigned to physical objects.
It's difficult to understand what an introduction of a new type of money looks like, because most people haven't experienced that in their lifetime. That's ok. But as a crowd of people here of who frequently espouse first-principles thinking, it's unfortunate to see people repeatedly falling for the "it has industrial uses" argument for gold. Yes industrial use creates a demand floor and a price floor. But if you think most of the price of gold is driven by it's industrial use then I have a bridge to sell you.
> The reason why gold has been the choice over most of human kind's history is that it has properties that make it suitable for money. It's scarce. It's difficult to make more of it. It's difficult to fake (until recently). It's easy to "hold". It's durable. But above all, it has a history of social consensus that it is the asset that is globally agreed upon to serve this purpose.
"It's easy to 'hold'" is literally true for precious metals, without quotes. And unless someone taints your stash with radioactive fallout or atomizes it, it's also relatively difficult to lose via Act of God.
Crypto?
It might just be the hardest asset class to "hold."
---
Also, all it takes for Bitcoin to lose literally all value is for miners to stop. While you might think the risk of this is zero, the risk is most assuredly higher than the risk of gold going to zero, which would only happen if all utility for gold disappears even outside its use as a store of value.
"It's easy to 'hold'" is literally true for precious metals, without quotes. And unless someone taints your stash with radioactive fallout or atomizes it, it's also relatively difficult to lose via Act of God.
Crypto?
It might just be the hardest asset class to "hold."
---
Also, all it takes for Bitcoin to lose literally all value is for miners to stop. While you might think the risk of this is zero, the risk is most assuredly higher than the risk of gold going to zero, which would only happen if all utility for gold disappears even outside its use as a store of value.
Why don't more people hold physical gold then? It's annoying to transport. It's difficult to prove that it's real. Someone can physically steal it from you. And it's certainly easier to hold large amounts if you're on the move.
The broader point here is that no form of money wins on all dimensions. While bitcoin is most closely compared to gold, it doesn't win on all fronts. I'll be first to admit that in my lifetime, I don't think people will find the idea of private key management easier than stashing a gold bar under their mattress. But the point is bitcoin represents a different point in the design space of money -- one that has characteristics and tradeoffs that make it particularly relevant in today's increasingly digital world.
> Also, all it takes for Bitcoin to lose literally all value is for miners to stop. While you might think the risk of this is zero, the risk is most assuredly higher than the risk of gold going to zero, which would only happen if all utility for gold disappears even outside its use as a store of value.
This like saying "gold loses most of its value of everyone suddenly decides its not worth what it is".
The miners are here ultimately because of the social consensus (and price) that has been building around bitcoin. This kind of thing doesn't just unwind overnight. It has been building for 15 years.
If you're holding gold and believing that there is similar risk in loss of social consensus, but you're saying "well at least it won't go to zero, i'll be able to get 15% out", does that really make it that much better as a store of value?
The broader point here is that no form of money wins on all dimensions. While bitcoin is most closely compared to gold, it doesn't win on all fronts. I'll be first to admit that in my lifetime, I don't think people will find the idea of private key management easier than stashing a gold bar under their mattress. But the point is bitcoin represents a different point in the design space of money -- one that has characteristics and tradeoffs that make it particularly relevant in today's increasingly digital world.
> Also, all it takes for Bitcoin to lose literally all value is for miners to stop. While you might think the risk of this is zero, the risk is most assuredly higher than the risk of gold going to zero, which would only happen if all utility for gold disappears even outside its use as a store of value.
This like saying "gold loses most of its value of everyone suddenly decides its not worth what it is".
The miners are here ultimately because of the social consensus (and price) that has been building around bitcoin. This kind of thing doesn't just unwind overnight. It has been building for 15 years.
If you're holding gold and believing that there is similar risk in loss of social consensus, but you're saying "well at least it won't go to zero, i'll be able to get 15% out", does that really make it that much better as a store of value?
> Also, all it takes for Bitcoin to lose literally all value is for miners to stop.
And all it takes to regain (some value) is for a few people to mine again. The difficulty will adapt. There are bigger threats than that, but all miners stopping is not one of them.
(didn't downvote you - I appreciate the discussion)
And all it takes to regain (some value) is for a few people to mine again. The difficulty will adapt. There are bigger threats than that, but all miners stopping is not one of them.
(didn't downvote you - I appreciate the discussion)
I agree with you on how many different objects, such as seashells or even certain types of stones have been used as money by some cultures. However, the point of this article is about real returns, and the real return of Gold over centuries - for example - has been zero, and this is with it having aesthetic and intrinsic values. Hence, Gold is not an investment class that Vanguard supports. So, why would Bitcoin give a postive real return, whether as a wealth preserving asset or currency?
Vanguard can have whatever policy it wants to, it's a free country.
But I do think it's somewhat hypocritical of them to not have things like gold and bitcoin when they do give access to other currencies -- many who's fate is also ultimately dependent on political decisions and global social consensus.
It's one thing to say we're not going to be let people speculate -- it's also another to say we're not going to let people hold assets that can hedge against global turmoil or hyperinflationary periods.
In terms of returns, I agree -- bitcoin's supposed "return" doesn't come from a productive use case in the same sense as other forms of capital (at least not yet.. though it is increasingly being used as a productive form of collateral in many cases, much in the same way that gold used to be used in contracts). But if you believe there is a trend of net shift in consensus away from gold and towards bitcoin, then it's also easy to see why you might expect the price per unit of bitcoin to go up.
It seems weird to me that vanguard lets you a make a statement like "I believe in the US gov's solvency so I'm going to hold all my financial worth in a sweep fund that earns money off of short term gov debt", but then at the same time not say things like "I think there's a small chance that the US gov might f' it up, or the balance of economic powers might shift in the world and so I want to hold other consensus assets that might diversify outcomes in those scenarios".
But I do think it's somewhat hypocritical of them to not have things like gold and bitcoin when they do give access to other currencies -- many who's fate is also ultimately dependent on political decisions and global social consensus.
It's one thing to say we're not going to be let people speculate -- it's also another to say we're not going to let people hold assets that can hedge against global turmoil or hyperinflationary periods.
In terms of returns, I agree -- bitcoin's supposed "return" doesn't come from a productive use case in the same sense as other forms of capital (at least not yet.. though it is increasingly being used as a productive form of collateral in many cases, much in the same way that gold used to be used in contracts). But if you believe there is a trend of net shift in consensus away from gold and towards bitcoin, then it's also easy to see why you might expect the price per unit of bitcoin to go up.
It seems weird to me that vanguard lets you a make a statement like "I believe in the US gov's solvency so I'm going to hold all my financial worth in a sweep fund that earns money off of short term gov debt", but then at the same time not say things like "I think there's a small chance that the US gov might f' it up, or the balance of economic powers might shift in the world and so I want to hold other consensus assets that might diversify outcomes in those scenarios".
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What do you own if you hold a money market cash position? The exact same thing as Bitcoin - faith of other people that currency is worth something. Look, I'm not a crypto bro or anything, but Vanguard talking about speculation is the absolute comedy gold. They operate a casino.
> They operate a casino.
On average you lose money at a casino because it is a business designed to make you lose money.
My vanguard funds on the other have gone up very nicely on average. Because they are invested in businesses designed to make shareholders money.
On average you lose money at a casino because it is a business designed to make you lose money.
My vanguard funds on the other have gone up very nicely on average. Because they are invested in businesses designed to make shareholders money.
For discussion, what's wrong with the statement "if you hold a money market cash position [you hold] the same thing as Bitcoin [or a crypto ETF]"? Or, say, you hold one of Vanguard's Gold ETFs. (Good faith)
You don’t own the exact same thing as bitcoin. A money market cash position is backed by money market instruments whereas bitcoin is bitcoin. A gold etf is backed by gold holdings. That’s not the same as bitcoin either. It’s like saying a baguette is the exact same thing as a mac and cheese. It just isn’t the same. You might like them all equally, like some but not the others or like none of them. Any of those positions is fine because it’s your money - but it makes absolutely no sense to think they’re the same.
Money we are using now is backed by obligation of people to pay it back and very well developed institutions that enforce it.
If you hold 100$ you know someone, somewhere needs it to pay their debt. If you hold Bitcoin no one ever needs to buy it from you unless they hope they can find a bigger sucker later.
Instruments in money market are of the kind of: "give me 100$ now and I will give you 101$ 3months later". Bitcoin is not backed by such contract. It's only backed by the hope of finding a bigger sucker later.
Instruments in money market are of the kind of: "give me 100$ now and I will give you 101$ 3months later". Bitcoin is not backed by such contract. It's only backed by the hope of finding a bigger sucker later.
I don't think Vanguard offers a gold ETF. (Gold ETFs do exist, Vanguard just doesn't do it.)
I'm pretty sure there's a lot of evidence that gold is a great inflation hedge but otherwise doesn't offer much in the way of returns on a long run basis. Which is a reason in various cases to hold or diversify into it over a money market fund (essentially over cash). That said, currently crypto has not proven itself to be either much like cash or much like gold.
I'm pretty sure there's a lot of evidence that gold is a great inflation hedge but otherwise doesn't offer much in the way of returns on a long run basis. Which is a reason in various cases to hold or diversify into it over a money market fund (essentially over cash). That said, currently crypto has not proven itself to be either much like cash or much like gold.
That doesn't address the spirit of the argument you are replying to.
Vanguard is 1. what they mention in their anti-cryoto thesis, all the real value makers that you don't need Vanguard to get into + 2. a casino on top of 1.
They sold you the idea, that their casino on top of 1. brings you money. I sincerely doubt it. You are making money on 1, true, and probably losing them on Vanguard.
Also, in BTC your Vanguard funds went down significantly on average.
Vanguard is 1. what they mention in their anti-cryoto thesis, all the real value makers that you don't need Vanguard to get into + 2. a casino on top of 1.
They sold you the idea, that their casino on top of 1. brings you money. I sincerely doubt it. You are making money on 1, true, and probably losing them on Vanguard.
Also, in BTC your Vanguard funds went down significantly on average.
Are you complaining about Vanguard's tiny fund management fees? I think they are worth the convenience to not have to buy 10,000 different stocks myself.
Vanguard is not a for-profit business, it's more like a credit union, it is owned by its own customers.
Vanguard is not a for-profit business, it's more like a credit union, it is owned by its own customers.
> I think they are worth the convenience to not have to buy 10,000 different stocks myself.
That's exactly the claim, yes. But how do you know just owning crypto (at infinity) does not have the same outcome?
That's exactly the claim, yes. But how do you know just owning crypto (at infinity) does not have the same outcome?
This is incoherent nonsense.
Vanguard is a service that manages your portfolio so you don't have to. Literally the definition of providing an economic service.
Owning the portfolio does come with risk, but it's not fixed odds, rather the odds track the literal economy. If you buy index funds, your ballot tracks the value of the country you invested in. When society does well, so do you. And guess what? Everyone, including the government, spends their life trying to generate value and wealth.
It isn't a casino. Likening the US economy to a casino is perhaps the most disingenuous nonsense I've heard from the church of crypto.
Vanguard is a service that manages your portfolio so you don't have to. Literally the definition of providing an economic service.
Owning the portfolio does come with risk, but it's not fixed odds, rather the odds track the literal economy. If you buy index funds, your ballot tracks the value of the country you invested in. When society does well, so do you. And guess what? Everyone, including the government, spends their life trying to generate value and wealth.
It isn't a casino. Likening the US economy to a casino is perhaps the most disingenuous nonsense I've heard from the church of crypto.
> Vanguard is a service that manages your portfolio so you don't have to. Literally the definition of providing an economic service.
How is it different from Bitcoin conceptually? Bitcoin reflects financial markets overall just as well as any Vanguard-managed fund. It does not matter that Vanguard intention is precisely that while Bitcoin's isn't if the outcome is the same.
Just in case I'll explain what I mean by an analogy: Imagine we are sailing an ocean in a small ship, and consequentially the ship rocks really hard. There's a table with two straight sticks on it in everyone's room, and the sticks constantly slide around the table due to rocking. And for whatever reason the parent comment author is tasked with keeping them as parallel as possible, while not stopping their movement alltogether. To do so he makes a contraption with electric motors attached to one end of each stick and sensors that detect when sticks are not parallel, which causes motors to align them. In the mean time in my room I took my sticks from the table and attached them to the ceiling instead because they look nice there. Here despite the lack of intention on my part my sticks will tend to stay parallel without much effort.
How is it different from Bitcoin conceptually? Bitcoin reflects financial markets overall just as well as any Vanguard-managed fund. It does not matter that Vanguard intention is precisely that while Bitcoin's isn't if the outcome is the same.
Just in case I'll explain what I mean by an analogy: Imagine we are sailing an ocean in a small ship, and consequentially the ship rocks really hard. There's a table with two straight sticks on it in everyone's room, and the sticks constantly slide around the table due to rocking. And for whatever reason the parent comment author is tasked with keeping them as parallel as possible, while not stopping their movement alltogether. To do so he makes a contraption with electric motors attached to one end of each stick and sensors that detect when sticks are not parallel, which causes motors to align them. In the mean time in my room I took my sticks from the table and attached them to the ceiling instead because they look nice there. Here despite the lack of intention on my part my sticks will tend to stay parallel without much effort.
> Bitcoin reflects financial markets
No it doesn't.
Bitcoin has no intrinsic tie to the financial markets.
The financial markets are all based on goods, services, and economic value. They build meta layers on top of it and sometimes those layers are bad, but nonetheless they are based on value.
Bitcoin is based on speculation. It offers no inherent value. No one needs or wants Bitcoin. People do want or need food, shelter, health, entertainment, education, human connection, etc, that the rest of the financial markets are based on.
I think a lot of crypto advocates don't understand that the stock market isn't made up. Yes there is volatility, yes it isn't perfect. But it isn't a pure casino.
Bitcoin has sometimes* correlated with the broader financial markets, but not because it was an indicator of the markets but because it was accidentally caught up in them as an inconsequential side thought. It got treated as an investment commodity by some big asset managers and thus followed the same trading patterns. When the asset managers thought outlook was poor, they sold a bit of everything, and everything would go down.
No it doesn't.
Bitcoin has no intrinsic tie to the financial markets.
The financial markets are all based on goods, services, and economic value. They build meta layers on top of it and sometimes those layers are bad, but nonetheless they are based on value.
Bitcoin is based on speculation. It offers no inherent value. No one needs or wants Bitcoin. People do want or need food, shelter, health, entertainment, education, human connection, etc, that the rest of the financial markets are based on.
I think a lot of crypto advocates don't understand that the stock market isn't made up. Yes there is volatility, yes it isn't perfect. But it isn't a pure casino.
Bitcoin has sometimes* correlated with the broader financial markets, but not because it was an indicator of the markets but because it was accidentally caught up in them as an inconsequential side thought. It got treated as an investment commodity by some big asset managers and thus followed the same trading patterns. When the asset managers thought outlook was poor, they sold a bit of everything, and everything would go down.
> Bitcoin has no intrinsic tie to the financial markets.
Not an obvious one for sure.
> The financial markets are all based on ...
> Bitcoin is based on ...
I don't understand why people consider this to be any kind of argument. The very same one also applies to AI discussions and comparing hardware used to run it to brains.
What does it matter what the thing "is based" on? Gas turbines, photovoltaics, and nuclear reactors are based on completely different phenomenon, and yet they all generate electricity.
I think you missed the whole point of my previous comment. Maybe the analogy was unclear? What do you think I was trying to say?
Not an obvious one for sure.
> The financial markets are all based on ...
> Bitcoin is based on ...
I don't understand why people consider this to be any kind of argument. The very same one also applies to AI discussions and comparing hardware used to run it to brains.
What does it matter what the thing "is based" on? Gas turbines, photovoltaics, and nuclear reactors are based on completely different phenomenon, and yet they all generate electricity.
I think you missed the whole point of my previous comment. Maybe the analogy was unclear? What do you think I was trying to say?
You forgot to say "so far". One of my managers was also flying high circa 2000 - multiple lakefront properties, Porsches you name it, the guy was living the life. In 2002 he was bankrupt - didn't sell his tech stocks in time, thought they'd "bounce back".
But I'm not talking about stocks. I'm talking about cash here. Cash is literally an article of faith and nothing else. It's not backed by any asset.
But I'm not talking about stocks. I'm talking about cash here. Cash is literally an article of faith and nothing else. It's not backed by any asset.
> multiple lakefront properties
Let me guess, bought on credit, he over leveraged
> Cash is literally an article of faith and nothing else. It's not backed by any asset.
The US dollar is backed by the federal government, a behemoth that handles more assets than any other entity on earth. For example we know they target 2% inflation on average. So US dollars are much more stable than if I were to issue my own "klipt bucks" currency.
Let me guess, bought on credit, he over leveraged
> Cash is literally an article of faith and nothing else. It's not backed by any asset.
The US dollar is backed by the federal government, a behemoth that handles more assets than any other entity on earth. For example we know they target 2% inflation on average. So US dollars are much more stable than if I were to issue my own "klipt bucks" currency.
I would love to get in on the ground floor with klipt bucks. I am sold on kliptomania!
US dollar is also constantly and arbitrarily diluted by the Federal Reserve, to the tune of $2-3T a year. If it was a stock, you'd run away in horror.
Cash isn’t an investment. It’s a temporary store of labor value. Since work now is worth more than work later, of course cash has value decay. If it didn’t, it wouldn’t be very good at its raison d’être.
The main reason the value of cash decays and the main reason central banks target 2% is downward wage rigidity. If you reduce wages of people, they get angry, sometimes very angry to the point of strikes. If the value simply drops, they don’t get as mad. It’s as simple as that, a matter of psychology and social institutions.
There is no reason why payment for labor should be a “temporary store of labor value”, whatever that means. There is no reason one cannot receive wage in productive assets, commodities, credit and whatnot.
There is no reason why payment for labor should be a “temporary store of labor value”, whatever that means. There is no reason one cannot receive wage in productive assets, commodities, credit and whatnot.
>There is no reason one cannot receive wage in productive assets, commodities, credit and whatnot.
You're right about that. It's called the barter system and we don't use it anymore because it's inefficient and sucks shit.
>The main reason the value of cash decays and the main reason central banks target 2% is downward wage rigidity. If you reduce wages of people, they get angry, sometimes very angry to the point of strikes. If the value simply drops, they don’t get as mad. It’s as simple as that, a matter of psychology and social institutions.
No, it's because if cash has a fixed value, then the "temporary" part of labor storage goes away and the economy grinds to a halt.
You're right about that. It's called the barter system and we don't use it anymore because it's inefficient and sucks shit.
>The main reason the value of cash decays and the main reason central banks target 2% is downward wage rigidity. If you reduce wages of people, they get angry, sometimes very angry to the point of strikes. If the value simply drops, they don’t get as mad. It’s as simple as that, a matter of psychology and social institutions.
No, it's because if cash has a fixed value, then the "temporary" part of labor storage goes away and the economy grinds to a halt.
> You're right about that. It's called the barter system and we don't use it anymore because it's inefficient and sucks shit.
Barter sucks because of coincidence of wants. It doesn’t suck because paying in S&P500 ETF doesn’t correspond to magical temporary store of labor whatever that is supposed to mean.
> No, it's because if cash has a fixed value, then the "temporary" part of labor storage goes away and the economy grinds to a halt.
What would grind to a halt exactly? Sorry, plebs, only rich people are allowed to be paid in stocks and other non-inflationary assets. You have to suffer, otherwise economy grinds to a halt!
Barter sucks because of coincidence of wants. It doesn’t suck because paying in S&P500 ETF doesn’t correspond to magical temporary store of labor whatever that is supposed to mean.
> No, it's because if cash has a fixed value, then the "temporary" part of labor storage goes away and the economy grinds to a halt.
What would grind to a halt exactly? Sorry, plebs, only rich people are allowed to be paid in stocks and other non-inflationary assets. You have to suffer, otherwise economy grinds to a halt!
>It doesn’t suck because paying in S&P500 ETF doesn’t correspond to magical temporary store of labor whatever that is supposed to mean.
How many shares of SPY does a car cost? Before you answer that, you cannot convert any value of this into currency first. I certainly can't answer it!
>Sorry, plebs, only rich people are allowed to be paid in stocks and other non-inflationary assets.
Rich people are paid in cash. When the CEO of a company gets $10m in stock grants, nobody involved in the transaction is working on number of shares of stock, they work with dollars and figure out how many shares they need to meet that number. If I get a $500 bonus from work and immediately buy a few shares of AAPL, there's no fundamental difference between that and me getting a $500 stock grant of AAPL. They're even taxed the same.
How many shares of SPY does a car cost? Before you answer that, you cannot convert any value of this into currency first. I certainly can't answer it!
>Sorry, plebs, only rich people are allowed to be paid in stocks and other non-inflationary assets.
Rich people are paid in cash. When the CEO of a company gets $10m in stock grants, nobody involved in the transaction is working on number of shares of stock, they work with dollars and figure out how many shares they need to meet that number. If I get a $500 bonus from work and immediately buy a few shares of AAPL, there's no fundamental difference between that and me getting a $500 stock grant of AAPL. They're even taxed the same.
> How many shares of SPY does a car cost? Before you answer that, you cannot convert any value of this into currency first. I certainly can't answer it!
How many wons does a car cost? Why would I know it? You seem to keep missing the point that the unit of payment doesn’t need to be inflationary. And that there is no magical requirement for it to be a temporary store of labor value.
> Rich people are paid in cash.
You confuse a store of value with a unit of account.
> If I get a $500 bonus from work and immediately buy a few shares of AAPL, there's no fundamental difference between that and me getting a $500 stock grant of AAPL.
Ok? If there is no fundamental difference then how is swapping one for another supposed to bring an economy to a halt?
How many wons does a car cost? Why would I know it? You seem to keep missing the point that the unit of payment doesn’t need to be inflationary. And that there is no magical requirement for it to be a temporary store of labor value.
> Rich people are paid in cash.
You confuse a store of value with a unit of account.
> If I get a $500 bonus from work and immediately buy a few shares of AAPL, there's no fundamental difference between that and me getting a $500 stock grant of AAPL.
Ok? If there is no fundamental difference then how is swapping one for another supposed to bring an economy to a halt?
OK, it's 2025. You have received $1M in cash. The US stock market is ludicrously overvalued across the board. What's your move?
Yeah I know the dollar is intended to lose value on average:
> we know they target 2% inflation on average
That's why you don't put all your long term savings in USD. But it's good to have your emergency fund in USD because it has less short term fluctuations than assets like stocks.
> we know they target 2% inflation on average
That's why you don't put all your long term savings in USD. But it's good to have your emergency fund in USD because it has less short term fluctuations than assets like stocks.
And emergencies will generally correlate with stock prices going down.
… I mean, yeah, you’re not _supposed_ to invest in cash. Cash is, essentially, for using. If, say, your pension is in cash, you’ve been very poorly advised.
Cash is a thing that has, at its base, value in so far as you can pay your taxes with it. If the whole world (including American citizens) stopped using USD tomorrow, it would still have value since the US Government still demands it.
I dislike that take. Taxes don't really matter, and there are examples of currencies that are worth something and that are not used for taxation. Cigarettes in prison is an example of a currency that is not taxed per se, the early US dollars are another example.
Currency is useful because people have faith in its properties: scarcity and ubiquity as a medium of exchange. Dollar is important because people have faith in the US government to not dilute it (too much), and because everyone in the world accepts it.
Bitcoin _is_ a currency. Its scarcity is limited by its construction, and it's widely accepted. But it's a bad currency, that is mostly backed by illicit transactions, and its "mechanical" usability just sucks due to delays and transaction fees.
Currency is useful because people have faith in its properties: scarcity and ubiquity as a medium of exchange. Dollar is important because people have faith in the US government to not dilute it (too much), and because everyone in the world accepts it.
Bitcoin _is_ a currency. Its scarcity is limited by its construction, and it's widely accepted. But it's a bad currency, that is mostly backed by illicit transactions, and its "mechanical" usability just sucks due to delays and transaction fees.
>Cigarettes in prison is an example of a currency that is not taxed per se.
Yes, cigarettes, like the dollar have an intrinsic value. You can smoke them and nicotine makes you feel good. It is similar to the way that I can pay my taxes in USD and feel comfort in the fact that I won't have to barter for cigarettes in federal prison.
Bitcoin is not a currency because it no longer meets the primary economic definition of currency - a medium of exchange. It is a speculative asset. A security, if you will. It can be used as a currency in the same way as gold bars and bricks of cocaine can (barter system) but it's not a currency.
Yes, cigarettes, like the dollar have an intrinsic value. You can smoke them and nicotine makes you feel good. It is similar to the way that I can pay my taxes in USD and feel comfort in the fact that I won't have to barter for cigarettes in federal prison.
Bitcoin is not a currency because it no longer meets the primary economic definition of currency - a medium of exchange. It is a speculative asset. A security, if you will. It can be used as a currency in the same way as gold bars and bricks of cocaine can (barter system) but it's not a currency.
Makes you wonder if Vanguard will change their position if the new administration gives crypto any sort of US backing. So far it seems like the new admin has only been interested on the scam side of crypto though.
That money market account is backed by bonds, which are assets. Why not also make the argument that stocks are an article of faith. You have faith that the business will act in your interests and the currency you invested in will still exist when its time to sell.
If your old manager went bankrupt by mis-timing the market with a handful of tech stocks, then he most certainly didn't invest the Vanguard way: diversify and hold on for the long haul.
If your old manager went bankrupt by mis-timing the market with a handful of tech stocks, then he most certainly didn't invest the Vanguard way: diversify and hold on for the long haul.
>> I'm talking about cash here. Cash is literally an article of faith and nothing else. It's not backed by any asset.
It's backed by contracts to pay it back. There are powerful institutions employing people with guns and other means to make you pay back. "Faith" undersells the situation. We developed the whole system to force people to pay their loans back.
It's backed by contracts to pay it back. There are powerful institutions employing people with guns and other means to make you pay back. "Faith" undersells the situation. We developed the whole system to force people to pay their loans back.
Can I buy (foreign) cash as an investment on Vanguard (I genuinely don't know)? The money market fund is about interests from debtors not currency speculation.
Cash is backed by a government that can exert influence and control over its population and counterparts with policy, laws or - at the extreme end - force.
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I think the difference is that the US dollar is actually used regularly as a currency and has the power of a government (and in particular the world's most powerful government) working to make sure that it operates as a useful currency.
On the other hand Bitcoin doesn't seem to have significant use as a currency outside of crime. Meme coins are even worse in that they don't have any use at all other than speculation.
On the other hand Bitcoin doesn't seem to have significant use as a currency outside of crime. Meme coins are even worse in that they don't have any use at all other than speculation.
In all fairness a money market cash position is basically accepting central bank interest while you decide what actual investment you want to put your money in.
People use it as part of an allocation, sure, but nobody plans to retire with interest from a checking account, which is pretty much what you'd be doing if you invest in a money market fund.
You may have a point that since fiat currency has no inherent value compared to physical commodities there's no reason that the right crypto couldn't function as a fiat currency, which seem true. But if crypto were fit for use as a fiat currency, you wouldn't expect it to be an investment at all - at least no compared to stocks, bonds, etc.
People use it as part of an allocation, sure, but nobody plans to retire with interest from a checking account, which is pretty much what you'd be doing if you invest in a money market fund.
You may have a point that since fiat currency has no inherent value compared to physical commodities there's no reason that the right crypto couldn't function as a fiat currency, which seem true. But if crypto were fit for use as a fiat currency, you wouldn't expect it to be an investment at all - at least no compared to stocks, bonds, etc.
It always gets me when people are like this about, of all things, the US dollar. You can argue that there are faith problems with, say, the Turkish Lira, but the USD is the hard currency that people flee to when others fail, and is accepted unofficially as hard currency in a lot of countries that have currencies of their own.
Even bitcoin is priced in USD and operates trades via a Tether/Circle "stablecoin" "backed" by USD.
Even bitcoin is priced in USD and operates trades via a Tether/Circle "stablecoin" "backed" by USD.
Do you think the daily volatility of purchasing power of the USD domestically is similar to that of bitcoin?
I don't often get a chance to commend a financial company for making a decision true to values and a long term view of the mission over making a quick buck, but Vanguard in this instance is such a chance.
I've been a customer for over 10 years, and am ever more proud of their commitment to promoting long term average investor goals.
I've been a customer for over 10 years, and am ever more proud of their commitment to promoting long term average investor goals.
I've also been a customer for over 10 years, and recently moved everything to Fidelity purely based on convenience. As far as I can tell, Fidelity is better equipped to be a full bank replacement (consolidating my various accounts held in various places & opening a brokerage line-of-credit).
This blog post, along with the fact that Vanguard is the only one of my accounts that immediately transferred my funds with no bullshit slow-walking the move, trying to keep them (looking at you, Schwab & E-Trade!), makes me sort of regret that transfer. I want to support companies like Vanguard!
This blog post, along with the fact that Vanguard is the only one of my accounts that immediately transferred my funds with no bullshit slow-walking the move, trying to keep them (looking at you, Schwab & E-Trade!), makes me sort of regret that transfer. I want to support companies like Vanguard!
The general consensus is Vanguard is amazing for how they revolutionized investing with index funds, its ownership model really does put investors first, but as a brokerage, it has quality-of-life issues with its website and apps. Spending an extra $10M per year on designers and UI engineers would change the game for them.
Vanguard is owned by its investors/customers which is you.
Aligned incentives at their best.
People still need to make executive decisions.
And frankly, I suspect a lot of Vanguard customers DID want crypto. There are greater objectives at stake, and so I am glad Vanguard held the line.
I'm not utterly opposed to a possible future scenario for certain cryptocurrencies maturing into a more integral asset to the economy. But we ain't there yet, and their current volatility and novelty should not be promoted under the Vanguard reputation.
And frankly, I suspect a lot of Vanguard customers DID want crypto. There are greater objectives at stake, and so I am glad Vanguard held the line.
I'm not utterly opposed to a possible future scenario for certain cryptocurrencies maturing into a more integral asset to the economy. But we ain't there yet, and their current volatility and novelty should not be promoted under the Vanguard reputation.
And assets in hedge funds are owned by investors,
yet the shady games they play with that money…
Good financial managers decide how a portfolio gets managed.
Good financial managers decide how a portfolio gets managed.
At Vanguard, not only are the assets owned by the shareholders. The manager itself is owned by the funds, and therefore by the shareholders.
That's not the case for a typical hedge fund.
That's not the case for a typical hedge fund.
That creates some interesting situations
like charging too little:
“VGI provides services to the Funds “at cost”, i.e., without charging an arm’s length profit. VGI is a C corporation and the Funds are Regulated Investment Companies (RICs) not taxable at the corporate level, so this situation results in avoidance of billions of corporate taxes.”
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2666426
“VGI provides services to the Funds “at cost”, i.e., without charging an arm’s length profit. VGI is a C corporation and the Funds are Regulated Investment Companies (RICs) not taxable at the corporate level, so this situation results in avoidance of billions of corporate taxes.”
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2666426
I left Vanguard over their decision to restrict investments into Bitcoin and moved to Fidelity. I view investment platforms as tools to express and communicate my investing theses. I do not want to be censored and unable to express my investment theses by a paternal company that “knows better” than me.
Same. I own a mix of ETFs, some from Vanguard and some not. I will be even more inclined to buy Vanguard ETFs going forward.
I am so, so tired of trying to explain to my retired mother why she should not buy any more bitcoin … with money that she really cannot afford to lose.
I am so, so tired of trying to explain to my retired mother why she should not buy any more bitcoin … with money that she really cannot afford to lose.
Are you willing to live with the fact that you may be wrong and she’s right?
Perfectly willing, yes. I believe in making decisions for the right reasons regardless of the eventual outcome.
I wouldn’t support her putting her retirement savings all on black either, even though she might win plenty.
I wouldn’t support her putting her retirement savings all on black either, even though she might win plenty.
As the post says, Vanguard also missed out on Internet funds in the 1990s, and they're OK with that.
I am, too. Nobody puts their money in Vanguard to jump on the latest thing (or in the case of Bitcoin, the latest 16-year-old thing). If you really want to speculate, move some of your money elsewhere from Vanguard.
I am, too. Nobody puts their money in Vanguard to jump on the latest thing (or in the case of Bitcoin, the latest 16-year-old thing). If you really want to speculate, move some of your money elsewhere from Vanguard.
> Nobody puts their money in Vanguard to jump on the latest thing
Most people that I've met who use Vanguard did not have an objective view on finance, or their risk-profile, the concept of a risk-profile, and were completely surprised to find that they had such a handicapped custodian
> If you really want to speculate, move some of your money elsewhere from Vanguard
Yes, this is the solution. You would be surprised how crazy of a thought that is to people. The idea of opening another bank or broker, despite how simple it is, just blows so many people's minds and is pretty controversial or involved to them.
They would prefer that Vanguard had all trading options.
Most people that I've met who use Vanguard did not have an objective view on finance, or their risk-profile, the concept of a risk-profile, and were completely surprised to find that they had such a handicapped custodian
> If you really want to speculate, move some of your money elsewhere from Vanguard
Yes, this is the solution. You would be surprised how crazy of a thought that is to people. The idea of opening another bank or broker, despite how simple it is, just blows so many people's minds and is pretty controversial or involved to them.
They would prefer that Vanguard had all trading options.
> The idea of opening another bank or broker, despite how simple it is
I would wager that there are a lot of people that have money in Vanguard because Vanguard provides their employer's 401k, and their choice was "Vanguard or no 401k", not "Vanguard or something else of your choice".
I would wager that there are a lot of people that have money in Vanguard because Vanguard provides their employer's 401k, and their choice was "Vanguard or no 401k", not "Vanguard or something else of your choice".
Vanguard is a good choice for managing retirement funds. If you want to speculate on high-risk investments, whether doctoms or crypto or whatever, it's better to do it outside your 401k.
yeah but the point is that the brand recognition is what occurred and they moved additional money in taxable accounts there
Misleading: "Over just the past three years, the price of bitcoin has increased by as much as 150% and declined by as much as 77%. Double-digit percent price drops are routine among cryptocurrencies. Remember that you need a 100% return just to make up for a 50% decline."
I agree with the article that Bitcoin isn't an investment, it's a speculation, but...
They are mixing an overall return with a time-period return to promote some fear. That 100% return you need is from the bottom, but they are quoting the 150% return from before the drop.
Specifics: Jan 1 2022 @ $47K to Nov 2022 @ $16K, Jan 2025 $98K. At $16K, yes you need like 150% return just to get back to where you started. Actual return from the bottom was over 600%. If you got in at $47K, you do not need a 150% cumulative return to recover from the big drop.
The average investor shouldn't have the majority of their money in speculative instruments. However, my FIL gave me some great advice: Take a little of your money and invest it in something you like. Say, 5%. It makes the investing a little more fun. Of course, I love it because after he said that I invested in something I liked and it went up 15x...
I agree with the article that Bitcoin isn't an investment, it's a speculation, but...
They are mixing an overall return with a time-period return to promote some fear. That 100% return you need is from the bottom, but they are quoting the 150% return from before the drop.
Specifics: Jan 1 2022 @ $47K to Nov 2022 @ $16K, Jan 2025 $98K. At $16K, yes you need like 150% return just to get back to where you started. Actual return from the bottom was over 600%. If you got in at $47K, you do not need a 150% cumulative return to recover from the big drop.
The average investor shouldn't have the majority of their money in speculative instruments. However, my FIL gave me some great advice: Take a little of your money and invest it in something you like. Say, 5%. It makes the investing a little more fun. Of course, I love it because after he said that I invested in something I liked and it went up 15x...
> Misleading: "Over just the past three years, […]
> They are mixing an overall return with a time-period return to promote some fear.
> Specifics: Jan 1 2022 @ $47K to Nov 2022 @ $16K, Jan 2025 $98K.
The article is dated January 24, 2024. It was roughly in the $40-$50 range.
The article is dated January 24, 2024. It was roughly in the $40-$50 range.
to the extent that executing transactions on a fully decentralized, trustless database or distributed computer is something people demand, and transaction fees must be paid in Bitcoin or Ethereum or Solana or whatever, cryptocurrencies do have some amount of actual use value, so are sort of like "commodities".
I believe this is a correct argument in theory. In practice, at the moment, everything is exclusively driven by speculation, and if you took the degenerate gambling out of the system, I don't know what would be left.
It's just gambling at all levels. There are legitimately "useful" services on blockchains, but the useful services they provide are mainly facilitating more gambling on stupid garbage coins. And even such useful "picks and shovels" services often still choose to make their own token for people to speculate on, because crypto people aren't interested in anything else. And then the L1 cryptocurrencies also have their prices driven by speculation.
there is a core of actual technical innovation, which is almost totally irrelevant to the phenomenon of "crypto" today. But there may be a future world where cryptocurrencies provide real value. In that world where all the true believers have their wildest dreams come true, the price of a cryptocurrency would be much higher than zero, but even then, it might be much lower than they are right now.
I believe this is a correct argument in theory. In practice, at the moment, everything is exclusively driven by speculation, and if you took the degenerate gambling out of the system, I don't know what would be left.
It's just gambling at all levels. There are legitimately "useful" services on blockchains, but the useful services they provide are mainly facilitating more gambling on stupid garbage coins. And even such useful "picks and shovels" services often still choose to make their own token for people to speculate on, because crypto people aren't interested in anything else. And then the L1 cryptocurrencies also have their prices driven by speculation.
there is a core of actual technical innovation, which is almost totally irrelevant to the phenomenon of "crypto" today. But there may be a future world where cryptocurrencies provide real value. In that world where all the true believers have their wildest dreams come true, the price of a cryptocurrency would be much higher than zero, but even then, it might be much lower than they are right now.
There are plenty of scams in the cypto world, in fact mostly anything related to crypto is scam/speculation. But I believe there is also a quiet revolution.
As far as mainstream financial organizations/economists/experts etc. are concerned, they have really no clue on the underlying revolution and transformation that is secretly underway because of crypto. Either that, or it dawns on them that the status quo will be disrupted, and then have a very predictable outburst: cite every imaginable crime being preferentially enabled by crypto.
As far as mainstream financial organizations/economists/experts etc. are concerned, they have really no clue on the underlying revolution and transformation that is secretly underway because of crypto. Either that, or it dawns on them that the status quo will be disrupted, and then have a very predictable outburst: cite every imaginable crime being preferentially enabled by crypto.
Could you show us examples of that secret revolution?
It does seem to be very secret because I've been waiting for it for fifteen years, first excitedly, then frustratedly.
It does seem to be very secret because I've been waiting for it for fifteen years, first excitedly, then frustratedly.
It's mostly happening in the 3rd world with unstable/high inflation currencies but who have internet access. We here in the 1st world have relatively stable financial systems so most people do not feel the need for crypto, except the anarchists.
Links? I've been hearing this for probably 8 years now.
No links, I know an acquaintance of mine who knows somebody in the third world.
Hey, speculation <> investment is a spectrum, it's fine to not care about the full spectrum.
But let's not pretend (for example) that gold price reflects it's industrial value more than it's speculative value. The same can be said of venture backed tech companies (ie. Wework?) early in their public lives.
But let's not pretend (for example) that gold price reflects it's industrial value more than it's speculative value. The same can be said of venture backed tech companies (ie. Wework?) early in their public lives.
Bitcoin is commonly compared to Gold and I agree with BTC proponents who state that most of Gold's value is driven by speculative investment, however in the long term (over centuries and even millenia) it has a demonstrated real return of zero. So Gold has preserved wealth.
Bitcoin might do the same, but for this to occur it will always need new liquidity as it lacks intrinsic value. But this also implies that the real return will be zero over the long term, like with Gold. Moreover, as it's value comes entirely from its price, the door to the 'price value' of Bitcoin (or any other similar asset) reaching the Moon or zero will always be open.
However, Gold does have intrinsic value (10% annual use in industry) and has, over millenia and at present, an aesthetic value (40% in Jewellery). Which would probably classed under Sign Value in semiotics. So it has intrinsic, exchange, symbolic and sign values too.
Note that over the long term, most commodity real returns have been zero or even negative. Unsurprising, as we have gotten far more efficient at extracting them.
Bitcoin might do the same, but for this to occur it will always need new liquidity as it lacks intrinsic value. But this also implies that the real return will be zero over the long term, like with Gold. Moreover, as it's value comes entirely from its price, the door to the 'price value' of Bitcoin (or any other similar asset) reaching the Moon or zero will always be open.
However, Gold does have intrinsic value (10% annual use in industry) and has, over millenia and at present, an aesthetic value (40% in Jewellery). Which would probably classed under Sign Value in semiotics. So it has intrinsic, exchange, symbolic and sign values too.
Note that over the long term, most commodity real returns have been zero or even negative. Unsurprising, as we have gotten far more efficient at extracting them.
> We do have a lot of interest in blockchain, the technology behind cryptocurrencies. We believe its application to a number of other uses besides crypto will make capital markets more efficient, and we’ve been actively involved in research to use blockchain technology
Well, they clearly have no idea what they’re talking about. Next!
Well, they clearly have no idea what they’re talking about. Next!
John Reed Stark, former Chief of Internet Enforcement of SEC on 60 minutes:
Crypto is a scourge, it is not something you want in your society. It has no utility. It is pure speculation. There is no balance sheet to crypto, there is no financial statements. There is no audit inspection, examination, net capital requirements, no licensure of individuals involved, and there is no transparency into it. That creates real systemic risks, not just risks for investors.
But the other part people don't talk about enough is the dire externalities that are enabled by crypto. Every single crime you can think of, is easier to do now because of crypto. Especially ransomware, human sex trafficking, sanctions evasion, money laundering. North Korea is financing their nuclear program using crypto.
---
Meanwhile, crypto investors, companies and executives accounted for almost half of corporate donations in the 2024 election cycle, with some contributing tens of millions of dollars to help Trump win a second term in office. See https://www.cnbc.com/2025/01/23/trump-signs-executive-order-...
Crypto is a scourge, it is not something you want in your society. It has no utility. It is pure speculation. There is no balance sheet to crypto, there is no financial statements. There is no audit inspection, examination, net capital requirements, no licensure of individuals involved, and there is no transparency into it. That creates real systemic risks, not just risks for investors.
But the other part people don't talk about enough is the dire externalities that are enabled by crypto. Every single crime you can think of, is easier to do now because of crypto. Especially ransomware, human sex trafficking, sanctions evasion, money laundering. North Korea is financing their nuclear program using crypto.
---
Meanwhile, crypto investors, companies and executives accounted for almost half of corporate donations in the 2024 election cycle, with some contributing tens of millions of dollars to help Trump win a second term in office. See https://www.cnbc.com/2025/01/23/trump-signs-executive-order-...
Jamie Dimon:
> Bitcoin itself has no intrinsic value,
> It’s used heavily by sex traffickers, by money launderers, ransomware. So I just don’t feel great about Bitcoin.
> Bitcoin itself has no intrinsic value,
> It’s used heavily by sex traffickers, by money launderers, ransomware. So I just don’t feel great about Bitcoin.
One thing I recently discovered that gave me some pause for thought is what happens if you buy a vanguard ETF and either the provider or vanguard itself somehow gets into trouble. For example, what happens if the ETF provider is actually loaning out the underlying stocks and gets caught by market movements. Apparently in the UK at least there are quite a few scenarios in which the FSCS 85k guarantee would not apply (in contrast to a cash savings account). See e.g. discussion here: https://monevator.com/physical-etf-risks/
I don't think this kind of situation could occur in the US because rehypothecation of shares underlying ETFs isn't allowed. See also https://www.bogleheads.org/wiki/Vanguard_safety And worst case if something did happen it would be bailed out.
"In a traditional portfolio with a mix of 60% stocks and 40% bonds, those seven stocks [Mag 7 stocks] each account for, on average, about the same share of overall portfolio risk as a 1-2% allocation to bitcoin"
- Blackrock, December 2024 [1]
[1] - https://www.blackrock.com/institutions/en-us/insights/portfo...
- Blackrock, December 2024 [1]
[1] - https://www.blackrock.com/institutions/en-us/insights/portfo...
Bitcoin and most other cryptocurrencies are not producing any product, collecting any interest, etc, with which to buyback or pay dividends. As such, investment in Bitcoin is a zero sum game: in order for you to make money off Bitcoin, someone else has to lose money on Bitcoin. As such, if you don't have a solid understanding of cryptocurrencies, and perhaps more importantly, market principles, you probably shouldn't buy cryptocurrencies because the odds are against you given you're playing this game against some very large, powerful, expert players.
It's actually worse than that because it's being diluted (albeit slowly). The only way around this is for more and more money to be invested in Bitcoin, forever, which obviously isn't sustainable, at least not at historical rates of growth. If world GDP continues to grow, Bitcoin can continue to grow by sucking up that growing value, but that's limited, ultimately by GDP. And there's a limit to how much of GDP people will be willing to put into Bitcoin: for example, 100% of corn farmers aren't going to take their profits from farming corn, and stop putting them into the next year's corn crop to buy Bitcoin instead, because the more corn farmers did this, the higher the price of corn would go, so at some point it would become obviously more profitable to farm corn than buy Bitcoin.
It is quite possible that we will continue to see new all-time highs for Bitcoin in the next few decades--there's still lots of wiggle room between global GDP and Bitcoin market cap. But Bitcoin growth will slow to less than GDP growth at some point. It's simply impossible for that not to happen.
It's actually worse than that because it's being diluted (albeit slowly). The only way around this is for more and more money to be invested in Bitcoin, forever, which obviously isn't sustainable, at least not at historical rates of growth. If world GDP continues to grow, Bitcoin can continue to grow by sucking up that growing value, but that's limited, ultimately by GDP. And there's a limit to how much of GDP people will be willing to put into Bitcoin: for example, 100% of corn farmers aren't going to take their profits from farming corn, and stop putting them into the next year's corn crop to buy Bitcoin instead, because the more corn farmers did this, the higher the price of corn would go, so at some point it would become obviously more profitable to farm corn than buy Bitcoin.
It is quite possible that we will continue to see new all-time highs for Bitcoin in the next few decades--there's still lots of wiggle room between global GDP and Bitcoin market cap. But Bitcoin growth will slow to less than GDP growth at some point. It's simply impossible for that not to happen.
Yes, at some point bitcoin will stop growing in value, I'll agree with that. Personally I think it will be at a market cap of $100T-200T (in today's dollars), but time will tell.
If you measure its value relative to dollars though, it will go up forever and faster than GDP (dollars are historically devalued by money supply inflation at 7%/year)
If you measure its value relative to dollars though, it will go up forever and faster than GDP (dollars are historically devalued by money supply inflation at 7%/year)
Sometimes I think I shouldn't have listened to Hacker News and certain subreddits like r/buttcoin over these past 17 years and should've just bought and held Bitcoin, I would've been a multi-millionaire by now like some stoners I know, who did nothing but buy Bitcoin early and sat on it until today.
Sometimes it's worth it to believe in an irrational market, depending on how long you (and it) can hold out.
Sometimes it's worth it to believe in an irrational market, depending on how long you (and it) can hold out.
I remember in 2013 when I first heard about it and didn't do anything. The question is: Will your friends know when to quit?
There are many bitcoin evangelists who think it will lead to freedom. The truth is that it will most likely lead to cbdc, that is why all banks, government and financial institutions are building blockchain technologies.
There are many bitcoin evangelists who think it will lead to freedom. The truth is that it will most likely lead to cbdc, that is why all banks, government and financial institutions are building blockchain technologies.
It already led to their freedom, at least. Even if Bitcoin went to zero, most of them have pulled out enough into fiat to be set for life.
For those who bought early it is certainly the case. Those late to the game will have the rug pulled just like a memecoin. There are many people who really believe it will go to $1M and they will use it freely ( their ideal of sound money). What is really valuable is the blockchain tech, the coin is speculation. That is because governments and banks will have more control over the coin on top of the base layer.
I don't think either are actually valuable, I don't see any application of blockchain anywhere that's better than traditional computing. Bitcoin itself seems to be the only good application so far.
[deleted]
If you’re saying “blockchain, not crypto” in 2025, you need to revisit your research process
"We do have a lot of interest in blockchain, the technology behind cryptocurrencies. We believe its application to a number of other uses besides crypto will make capital markets more efficient, and we’ve been actively involved in research to use blockchain technology."
The exact opposite is true. Blockchain "technology" is useless beyond its ability to enable Bitcoin - a monetary innovation. Using it for anything other than that is simply trying to find a problem for a solution. Crypto beyond Bitcoin is also largely useless beyond serving as a democratized casino.
The exact opposite is true. Blockchain "technology" is useless beyond its ability to enable Bitcoin - a monetary innovation. Using it for anything other than that is simply trying to find a problem for a solution. Crypto beyond Bitcoin is also largely useless beyond serving as a democratized casino.
While I personally don’t believe in Bitcoin or any other crypto currency, I couldn’t stop laughing about your comment on the blockchain.
I have met so many people obsessed with building things on top of the blockchain and when you ask them what it is they need it is essentially a database and they don’t want it to be public. Fortunately the recent years this has been a decreasing trend. Only now a days the requests are to replace developers with 10x AI agents.
I have met so many people obsessed with building things on top of the blockchain and when you ask them what it is they need it is essentially a database and they don’t want it to be public. Fortunately the recent years this has been a decreasing trend. Only now a days the requests are to replace developers with 10x AI agents.
Yeah. The reality is that we enter into very few zero trust transactions. I don’t need a blockchain to guarantee things when the law and contracts have handled that fine for a very long time.
Possession is 9/10 of the law. A guarantee of possession gives you that 9/10. A legal contract leaves you calling a lawyer to grasp at the other 1/10, if it's even worth it for the financial value of your contract.
In short, the legal system is pretty useless in enforcing any broken contract that's worth less than a few thousand dollars, especially one of any complexity.
And as an aside, I feel like I enter into low-trust transactions all the time. Don't you?
* I don't trust people who sell products to me online. I've gotten bad product many times. But I need to be able to buy from independent sellers online.
* On a related note, I don't trust half the websites I put my credit card info into. But it's an important part of sending money over the internet.
* I don't trust my ride share drivers or short-term-rental hosts. I could do without short-term-rentals by only staying at trusted hotels, but I can't really do without ride shares.
* When I trade a stock with some random counterparty, I don't trust them to actually deliver the stock to me at T+1. But I need to be able to trade stocks with whoever else can give me the best price.
The typical solution is to have a corporation step in to act as judge and jury for contract breaches that are too small to be worth bringing to court (brokerages, credit card companies, Amazon, PayPal, AirBnB, Uber). In fact, these companies' main value creation has come from adding a layer of trust to traditionally zero-trust transactions. Thus, these zero-trust transactions have been able to thrive while the dispute resolution corporation charges fees for their value-added trust.
The only reason these roles traditionally have to be performed by companies is that autonomous money-custodying software did not exist. But programmable blockchains now allow for this. You could easily imagine a dispute-resolution alternative to PayPal where the organizational structure is a piece of autonomous software directly employing people/AI, rather than a traditional corporate entity.
In short, the legal system is pretty useless in enforcing any broken contract that's worth less than a few thousand dollars, especially one of any complexity.
And as an aside, I feel like I enter into low-trust transactions all the time. Don't you?
* I don't trust people who sell products to me online. I've gotten bad product many times. But I need to be able to buy from independent sellers online.
* On a related note, I don't trust half the websites I put my credit card info into. But it's an important part of sending money over the internet.
* I don't trust my ride share drivers or short-term-rental hosts. I could do without short-term-rentals by only staying at trusted hotels, but I can't really do without ride shares.
* When I trade a stock with some random counterparty, I don't trust them to actually deliver the stock to me at T+1. But I need to be able to trade stocks with whoever else can give me the best price.
The typical solution is to have a corporation step in to act as judge and jury for contract breaches that are too small to be worth bringing to court (brokerages, credit card companies, Amazon, PayPal, AirBnB, Uber). In fact, these companies' main value creation has come from adding a layer of trust to traditionally zero-trust transactions. Thus, these zero-trust transactions have been able to thrive while the dispute resolution corporation charges fees for their value-added trust.
The only reason these roles traditionally have to be performed by companies is that autonomous money-custodying software did not exist. But programmable blockchains now allow for this. You could easily imagine a dispute-resolution alternative to PayPal where the organizational structure is a piece of autonomous software directly employing people/AI, rather than a traditional corporate entity.
No, the idea is anonymity. How can you trust the contract between you and some user across the world? Yes, crypto solves it. Law won’t help when someone tries to scam you across the world, at least in majority of cases.
> between you and some user across the world? Yes, crypto solves it
Crypto solves a problem that less than 0.1% of the world have. It's not very useful. Local laws and regulations are way more effective for me.
Crypto solves a problem that less than 0.1% of the world have. It's not very useful. Local laws and regulations are way more effective for me.
A friend who in cybercrime talks weekly about scammers using Bitcoin ATMs and there being no way to get it back compared to traditional banking where he regularly gets victims their money back.
> Yes, crypto solves it.
The vast majority of scams are run through crypto now. In fact, crypto is a step backwards and makes it easier to scam people.
The vast majority of scams are run through crypto now. In fact, crypto is a step backwards and makes it easier to scam people.
Crypto lets you engage in any contract you and your counterparty can codify. The reason that so many scams are run through crypto is because the vast majority of people either don't use smart contracts (in which case you're just sending your money to someone and praying), or if they do, they don't read or understand the smart contracts they're using.
The solution to this is maturity. The endgame is to be able to create smart contracts that are as readable to a layperson, if not more readable, than legal contracts. And to come up with a set of standard smart contract templates vetted by programmers, just as today we have a set of standard legal contract templates vetted by lawyers.
That, and encouraging people to actually read what they sign, whether it's a pen-and-paper signature or a cryptographic signature.
The solution to this is maturity. The endgame is to be able to create smart contracts that are as readable to a layperson, if not more readable, than legal contracts. And to come up with a set of standard smart contract templates vetted by programmers, just as today we have a set of standard legal contract templates vetted by lawyers.
That, and encouraging people to actually read what they sign, whether it's a pen-and-paper signature or a cryptographic signature.
> they don't read or understand the smart contracts they're using
I'll tell my parents to learn JavaScript or Rust to make sure that there is no bug in the smart contracts they are signing.
I'll tell my parents to learn JavaScript or Rust to make sure that there is no bug in the smart contracts they are signing.
Aside from my point that most contracts can be based on highly-vetted templates, smart contracts don't need to be written in JavaScript or Rust. They can be written using little puzzle pieces that anyone can understand.
https://i.imgur.com/MgEw0Bd.png
As a fun fact, a puzzle-piece style editor like this is how I wrote my first computer program as a toddler.
https://i.imgur.com/MgEw0Bd.png
As a fun fact, a puzzle-piece style editor like this is how I wrote my first computer program as a toddler.
Fully disagree. Tokenization enables better financial markets. Bitcoin is the useless asset since it's proven that productive assets (think stocks) are better store of values than unproductive ones (think gold). Ethereum in that sense is productive because you can stake it for a yield and collaterize it natively to borrow against it and you can tokenize anything on top of it.
If tokenization requires a trusted party to issue the tokens (think stocks) then no blockchain is needed
There's an intermediary scenario to consider: when multiple trusted parties are involved. This is basic computer science, and software engineering: crash and byzantine fault-tolerant systems.
On a related note, blockchains often obscure the true consensus mechanism behind layers of complex jargon. Upon closer inspection, consensus is still built on trusted parties, just not the same ones typically found in the traditional economy. In Bitcoin, for example, you not only have the relatively few powerful miners but also the Bitcoin Core developers, who wield significant influence over which changes are incorporated into the Bitcoin node. For example, enabling the OP_CAT opcode again [1][2].
[1] https://www.reddit.com/r/CryptoTechnology/comments/19bik6z/u...
[2] https://www.reddit.com/r/Bitcoin/comments/19adyi0/should_op_...
On a related note, blockchains often obscure the true consensus mechanism behind layers of complex jargon. Upon closer inspection, consensus is still built on trusted parties, just not the same ones typically found in the traditional economy. In Bitcoin, for example, you not only have the relatively few powerful miners but also the Bitcoin Core developers, who wield significant influence over which changes are incorporated into the Bitcoin node. For example, enabling the OP_CAT opcode again [1][2].
[1] https://www.reddit.com/r/CryptoTechnology/comments/19bik6z/u...
[2] https://www.reddit.com/r/Bitcoin/comments/19adyi0/should_op_...
There’s also ASIC manufacturing monopoly
Then that means stablecoins aren’t needed.
And yet, reality disagrees with your logic and stablecoins are on track to be used even more.
Tokenization on Ethereum will end up being way more important and useful than pet rock Bitcoin.
And yet, reality disagrees with your logic and stablecoins are on track to be used even more.
Tokenization on Ethereum will end up being way more important and useful than pet rock Bitcoin.
The most popular stablecoins aren't trustless, proving the parent's point.
Parent's point is weak - it's not possible right now for people around the world to hold fiat/stocks in their own centralized, custodial wallets due to stringent KYC/AML, and blockchains currently fill that need for stablecoins, and will fill that need for tokenized stocks, treasuries, etc.
And again, nobody needs blockchains to tokenize centrally issued securities.
> Bitcoin is the useless asset since it's proven that productive assets (think stocks) are better store of values than unproductive ones (think gold).
This has hardly been proven. Gold has been recognized as source of value across several millennia and multiple cultures. I would bet that 1000 years from now gold will still have value, whereas stocks are only valuable in as much as the rights that they represent can be enforced by a court and implicitly the state backing it.
This has hardly been proven. Gold has been recognized as source of value across several millennia and multiple cultures. I would bet that 1000 years from now gold will still have value, whereas stocks are only valuable in as much as the rights that they represent can be enforced by a court and implicitly the state backing it.
We are <one mile-sized asteroid made of gold> away from gold losing all its value. One such asteroid has been discovered already. It's called 16 Psyche, 140 miles in diameter and made largely of gold and other precious metals. To compare, all gold ever mined on Earth fits into a 22-meter cube.
We are one government/imperial collapse from US stocks losing all value. Historically which is more likely to happen?
Both are more likely to happen than Bitcoin being cracked.
How are you so certain about the composition of 16 Psyche?
NASA was confident enough to send a rocket towards it, it is scheduled to reach 16 Psyche in 2029.
leishman(3)
I would not say useless. But blockchain has very limited use outside cryptocurrencies. Although, some of the innovations that happened around blockchains are useful in many other scenarios.
P.S. I do have a Ph.D. in trying to fit blockchain for other use cases.
P.S. I do have a Ph.D. in trying to fit blockchain for other use cases.
What are some good noncrypto uses of blockchains that you've seen?
Timestamping (which is actually what bitcoin is). For better or worse, this is one commercial application of it: https://guardtime.com/platform
Guatemalan dev Rafael Cordon made a project called Simple Proof that leverages OpenTimestamps for election security.
It was used in the Guatemalan 2023 elections to timestamp tally sheets in different election districts around the country, so they can't be manipulated at a later time.
It was used in the Guatemalan 2023 elections to timestamp tally sheets in different election districts around the country, so they can't be manipulated at a later time.
Timestamp.com is owned by a buddy of mine. Long before blockchain, we tried to build a company around being an SMTP relay and a special HP PCIe card that took the GPS signal as its source. The card was special because it was encased in glass and an inert gas, which could sense if it was tampered with. Ahh... the good old days.
....or, you just use the same timestamp mechanism available for code signing. Aka you ask a CA to issue a signed timestamp against a content hash and while you are at it, you can get multiple CAs in it.
The fact that there are other ways to work around previous limitations to accomplish something doesn't render the use-case invalid. The GP was asking for a usecase outside of currency and one was provided. If a valid use-case for electricity was asked, and someone described a lightbulb, you could just as well say "...or, you could just use an oil lamp"
The problem with any privately run, or centrally controlled blockchain, is that it’s difficult as the operator of the blockchain to demonstrate to a third party that the blockchain hasn’t been tampered with.
If I run a blockchain that I, or my business, has full control of, and I show you as a form of “proof”, you shouldn’t believe me. A time stamped Twitter post would hold more weight.
The power of, say, the bitcoin blockchain, is in the fact that it’s widely distributed and publicly verifiable by anyone, and due to the size of the network it is prohibitively expensive to tamper with.
If I run a blockchain that I, or my business, has full control of, and I show you as a form of “proof”, you shouldn’t believe me. A time stamped Twitter post would hold more weight.
The power of, say, the bitcoin blockchain, is in the fact that it’s widely distributed and publicly verifiable by anyone, and due to the size of the network it is prohibitively expensive to tamper with.
My favorite example is Ethereum Name Service (ENS).
Instead of a patchwork of DNS servers that can go down, registrars that go through enshittification cycles, and complicated ownership/transfer rules that vary based on country and TLD, ENS presents a single unified database that runs on signed message broadcasts.
To change an ENS entry, you just sign a message and broadcast it anywhere. No need to interface with a registrar. The global resolver gets updated seconds later.
It reduces an incredibly complex system of registries and registrars, authoritative and recursive resolvers, domain transfers - it distills it down to a system of just sending signed messages to update a single global name database that gets replicated to everyone who cares to have a copy.
Instead of a patchwork of DNS servers that can go down, registrars that go through enshittification cycles, and complicated ownership/transfer rules that vary based on country and TLD, ENS presents a single unified database that runs on signed message broadcasts.
To change an ENS entry, you just sign a message and broadcast it anywhere. No need to interface with a registrar. The global resolver gets updated seconds later.
It reduces an incredibly complex system of registries and registrars, authoritative and recursive resolvers, domain transfers - it distills it down to a system of just sending signed messages to update a single global name database that gets replicated to everyone who cares to have a copy.
Clearly, digital ownership for something that truly lives on the blockchain and not outside is an obvious use case. But it also illustrates that blockchains are pretty useless beyond that.
I also wonder how the long-term monetary incentives work for a truly trustless domain name scheme. Having a quick look at https://app.ens.domains this doesn't seem terribly cheaper than a traditional registrar.
I also wonder how the long-term monetary incentives work for a truly trustless domain name scheme. Having a quick look at https://app.ens.domains this doesn't seem terribly cheaper than a traditional registrar.
> To change an ENS entry, you just sign a message and broadcast it anywhere. No need to interface with a registrar. The global resolver gets updated seconds later.
Yeah. And if your domain name keys are stolen or lost, they're gone. Forever. Or held for ransom. That's a huge reason why people are not rushing to use blockchain-based DNS.
Yeah. And if your domain name keys are stolen or lost, they're gone. Forever. Or held for ransom. That's a huge reason why people are not rushing to use blockchain-based DNS.
Have you ever had a domain name stolen? They're also gone forever in most cases. There is no standard recovery path once a domain leaves the hands of your registrar. You might as well be trying to reverse an international wire transfer.
ENS is not worse in this respect than DNS. The DNS solution is for your registrar to require 2FA to protect your name from being transferred out in the first place. The ENS solution is for your custodian to... require 2FA to protect your name from being transferred out in the first place.
The difference is that anyone has the option to custody their own domain name if they want to - entrusting a third party is not a necessity.
Edit: Additionally, ENS gives you the equivalent of DNSSEC for free. So no need for certificate authorities, which represent DNS' reliance on cryptographic keys that would be catstrophic if stolen anyways.
ENS is not worse in this respect than DNS. The DNS solution is for your registrar to require 2FA to protect your name from being transferred out in the first place. The ENS solution is for your custodian to... require 2FA to protect your name from being transferred out in the first place.
The difference is that anyone has the option to custody their own domain name if they want to - entrusting a third party is not a necessity.
Edit: Additionally, ENS gives you the equivalent of DNSSEC for free. So no need for certificate authorities, which represent DNS' reliance on cryptographic keys that would be catstrophic if stolen anyways.
> Have you ever had a domain name stolen? They're also gone forever in most cases.
If it's a high-value domain, you call the registrar and get it back. Worst case, you can sue the thief if you hold a trademark for the name.
> There is no standard recovery path once a domain leaves the hands of your registrar.
There is. It's called "a lawsuit".
If it's a high-value domain, you call the registrar and get it back. Worst case, you can sue the thief if you hold a trademark for the name.
> There is no standard recovery path once a domain leaves the hands of your registrar.
There is. It's called "a lawsuit".
> If it's a high-value domain, you call the registrar and get it back.
When a domain name is stolen, definitionally it leaves control of the registrar.
> Worst case, you can sue the thief if you hold a trademark for the name.
You can also sue a thief who has a blockchain name. Blockchains don't magically make it so you can't sue someone and win a judgement.
International lawsuits for domain recovery work fine if you're a medium to large company. But "just sue an international thief" doesn't work so well if you're a small business or an individual. In that case, DNS doesn't hold any legal advantage over ENS, whereas ENS allows for much greater flexibility in secure custody setups to prevent theft in the first place.
> There is. It's called "a lawsuit".
And you can just as "easily" sue someone who steals a blockchain name. Just dig past the fake identity they're hiding behind, figure out which city and country they live in, hire a private investigator to determine their name and address, and hire a lawyer that practices in the theif's country but speaks your native language. It's not any harder than suing someone who stole your DNS name.
When a domain name is stolen, definitionally it leaves control of the registrar.
> Worst case, you can sue the thief if you hold a trademark for the name.
You can also sue a thief who has a blockchain name. Blockchains don't magically make it so you can't sue someone and win a judgement.
International lawsuits for domain recovery work fine if you're a medium to large company. But "just sue an international thief" doesn't work so well if you're a small business or an individual. In that case, DNS doesn't hold any legal advantage over ENS, whereas ENS allows for much greater flexibility in secure custody setups to prevent theft in the first place.
> There is. It's called "a lawsuit".
And you can just as "easily" sue someone who steals a blockchain name. Just dig past the fake identity they're hiding behind, figure out which city and country they live in, hire a private investigator to determine their name and address, and hire a lawyer that practices in the theif's country but speaks your native language. It's not any harder than suing someone who stole your DNS name.
> When a domain name is stolen, definitionally it leaves control of the registrar.
So call the registry?
The difference is that a judgement will actually get you something because in the end, the registry can give the domain to whoever they want. If your crypto DNS name is gone, you can’t appeal anywhere, even if you win your lawsuit (which you will, the opponent won’t appear).
So call the registry?
The difference is that a judgement will actually get you something because in the end, the registry can give the domain to whoever they want. If your crypto DNS name is gone, you can’t appeal anywhere, even if you win your lawsuit (which you will, the opponent won’t appear).
> So call the registry?
Verisign's phone tree is pretty gnarly last time I checked.
> The difference is that a judgement will actually get you something
It could easily cost tens to hundreds of thousands of dollars to win a lawsuit in the registrar's jurisdiction, which is not feasible for an individual or small business.
As far as large corporations go, they don't have to worry about domain theft anyways. They all just pay tens of thousands of dollars for MarkMonitor to guard their domains with enterprise security, never have their domains stolen, and call it a day. I think where ENS shines is for small businesses and individuals.
The better option than recovery is just to prevent your domain from being stolen in the first place. For ENS or DNS this is fundamentally the same concept - just make sure you trust the company that holds custody of your domain name. For ENS, you have the option but not the obligation to custody your name yourself, or to use an M-of-N signature scheme amongst trusted friends, business partners, and/or third-party companies. It's hard to steal a domain name when you need to fool 3 out of 5 executives plus a third party into approving a transfer.
> the registry can give the domain to whoever they want
Could be a feature, could be a bug.
Verisign's phone tree is pretty gnarly last time I checked.
> The difference is that a judgement will actually get you something
It could easily cost tens to hundreds of thousands of dollars to win a lawsuit in the registrar's jurisdiction, which is not feasible for an individual or small business.
As far as large corporations go, they don't have to worry about domain theft anyways. They all just pay tens of thousands of dollars for MarkMonitor to guard their domains with enterprise security, never have their domains stolen, and call it a day. I think where ENS shines is for small businesses and individuals.
The better option than recovery is just to prevent your domain from being stolen in the first place. For ENS or DNS this is fundamentally the same concept - just make sure you trust the company that holds custody of your domain name. For ENS, you have the option but not the obligation to custody your name yourself, or to use an M-of-N signature scheme amongst trusted friends, business partners, and/or third-party companies. It's hard to steal a domain name when you need to fool 3 out of 5 executives plus a third party into approving a transfer.
> the registry can give the domain to whoever they want
Could be a feature, could be a bug.
> Verisign's phone tree is pretty gnarly last time I checked.
If your name is like `microsoft.com`, then you call the registrar. They have contacts in the .com and .net TLD administrators to file issues. If that fails, there's a formal process: https://www.icann.org/resources/pages/providers-6d-2012-02-2...
Never mind that most registrars have protections against the transfer and will generally spam the hell out of you with notifications.
This makes the domain hijacking a low-value target for crooks. It happens, but not a lot.
> The better option than recovery is just to prevent your domain from being stolen in the first place.
Which will not happen. You still have all the same issues with lost keys, misconfigured settings, etc. Except now with zero recourse.
> For ENS, you have the option but not the obligation to custody your name yourself, or to use an M-of-N signature scheme amongst trusted friends, business partners, and/or third-party companies.
Yeah. Have you actually ever done anything like that in real life?
That's the thing, blockchain astronauts are kinda like PGP enthusiasts. They keep claiming that it solves all the problems, if you attend their groupie, erm, key signing party.
If your name is like `microsoft.com`, then you call the registrar. They have contacts in the .com and .net TLD administrators to file issues. If that fails, there's a formal process: https://www.icann.org/resources/pages/providers-6d-2012-02-2...
Never mind that most registrars have protections against the transfer and will generally spam the hell out of you with notifications.
This makes the domain hijacking a low-value target for crooks. It happens, but not a lot.
> The better option than recovery is just to prevent your domain from being stolen in the first place.
Which will not happen. You still have all the same issues with lost keys, misconfigured settings, etc. Except now with zero recourse.
> For ENS, you have the option but not the obligation to custody your name yourself, or to use an M-of-N signature scheme amongst trusted friends, business partners, and/or third-party companies.
Yeah. Have you actually ever done anything like that in real life?
That's the thing, blockchain astronauts are kinda like PGP enthusiasts. They keep claiming that it solves all the problems, if you attend their groupie, erm, key signing party.
> If your name is like `microsoft.com`, then you call the registrar.
As I said, large companies like Microsoft don't risk their domains being stolen in the first place, since they use enterprise protection services like MarkMonitor.
> there's a formal process
Ultimately every time I discuss ENS, the conversation turns into a discussion about how feasible it is for a layperson to afford, file, and actually win a UDRP dispute to recover a stolen domain name, which doesn't have any provision for theft by the way. UDRP only considers whether the current owner of the domain is using the domain to infringe upon your business trademark (if you have one).
The answer is that UDRP is completely unworkable for the vast majority of people who are at risk of domain theft; it isn't even an anti-theft tool. In terms of theft resolution, it's a justice theater where you can watch it work for very specific types of companies who have very specific trademark issues that the UDRP covers, and imagine that it must work great for every mom and pop who has a domain name nicked because surely we live in a just world.
The individual filing the dispute is on the hook for the UDRP fees which are significant and I believe well into the four figures (completely unaffordable in developing countries, and likely not worth it for small businesses). Typically companies need to hire a specialized lawyer to navigate the UDRP system, at additional expense.
So you're misinformed that there is a formal process for domain theft - the UDRP is only for trademark infringement. UDRP is unnecessary for large companies (who have the resources to safeguard their name from theft) and it's useless to individuals and small companies who can't afford it and/or have theft problems but no trademark infringement problems. UDRP is only useful if you are a medium-sized company with a well-established trademark in a developed country and you didn't do your due diligence in properly securing your domain name.
So I'll give you that - if you're a medium-sized company with a well-established trademark in a developed country and you didn't do your due diligence in properly securing your domain name, then UDRP might be better than nothing. But depending on what kind of company you are, it still might be cheaper and easier to just switch domain names.
> Never mind that most registrars have protections against the transfer and will generally spam the hell out of you with notifications.
A blockchain can be designed to be more reliable because it doesn't "generally" do anything. It always, specifically, does exactly what it's programmed to do. A smart contract's predictability is a function of how well it's understood, and the tooling for creating and auditing bug-free smart contracts is maturing rapidly.
If you want to be spammed with notifications, there's nothing more reliable than multiple audited pieces of open source software that run directly on all your devices and monitor a public blockchain for an action. Add several third-party blockchain monitoring services for good measure.
And, of course, it's easy to write custody code in such a way that transfers are time-locked, so you have time to see the notification before the name changes owners. Write-once, audit-once, use-many.
> Have you actually ever done anything like that in real life?
Yes.
But aside from that, I use cryptographic keys in my life for countless reasons other than cryptocurrency. Git, SSH, E2E messaging apps, web passkeys, object storage, HTTPS server certificates, tapping my credit card at the supermarket, accessing the cell network, unlocking my car, etc. Everyone is already managing cryptographic keys whether they know it or not, and everyone's cell phone has keys already available and quite safe in its secure element, ready to sign messages with.
No need to break out the pocket protectors and meet up in someone's living room. A key signing ceremony for ENS could be easily piggybacked off a standard E2E group chat, like for example a Signal or iMessage chat:
* Someone creates a group chat on their smartphone and invites people (specifying the "M" value, aka the threshold for a valid group signature)
* The invited people join, their devices silently and automatically exchange keys, and the chat displays the group key
* Whoever has the asset transfers it to the group key
* Whenever someone proposes a message to sign, the system messages the group chat showing how many more signatures are needed, with a "sign" button that people can click.
This is pretty similar to what Safe Wallet already does, and it currently secures over $100 billion worth of cryptocurrency for some of the largest companies in the industry. But it's also quite simple to just download the app and use it as an end-user. It's directly compatible with ENS, since they both implement the ERC-721 token standard.
I've thought through all of this extensively, I know quite a lot of details about how both blockchains and the current DNS systems work, I've had numerous conversations with countless people about it, and it all adds up to me.
As I said, large companies like Microsoft don't risk their domains being stolen in the first place, since they use enterprise protection services like MarkMonitor.
> there's a formal process
Ultimately every time I discuss ENS, the conversation turns into a discussion about how feasible it is for a layperson to afford, file, and actually win a UDRP dispute to recover a stolen domain name, which doesn't have any provision for theft by the way. UDRP only considers whether the current owner of the domain is using the domain to infringe upon your business trademark (if you have one).
The answer is that UDRP is completely unworkable for the vast majority of people who are at risk of domain theft; it isn't even an anti-theft tool. In terms of theft resolution, it's a justice theater where you can watch it work for very specific types of companies who have very specific trademark issues that the UDRP covers, and imagine that it must work great for every mom and pop who has a domain name nicked because surely we live in a just world.
The individual filing the dispute is on the hook for the UDRP fees which are significant and I believe well into the four figures (completely unaffordable in developing countries, and likely not worth it for small businesses). Typically companies need to hire a specialized lawyer to navigate the UDRP system, at additional expense.
So you're misinformed that there is a formal process for domain theft - the UDRP is only for trademark infringement. UDRP is unnecessary for large companies (who have the resources to safeguard their name from theft) and it's useless to individuals and small companies who can't afford it and/or have theft problems but no trademark infringement problems. UDRP is only useful if you are a medium-sized company with a well-established trademark in a developed country and you didn't do your due diligence in properly securing your domain name.
So I'll give you that - if you're a medium-sized company with a well-established trademark in a developed country and you didn't do your due diligence in properly securing your domain name, then UDRP might be better than nothing. But depending on what kind of company you are, it still might be cheaper and easier to just switch domain names.
> Never mind that most registrars have protections against the transfer and will generally spam the hell out of you with notifications.
A blockchain can be designed to be more reliable because it doesn't "generally" do anything. It always, specifically, does exactly what it's programmed to do. A smart contract's predictability is a function of how well it's understood, and the tooling for creating and auditing bug-free smart contracts is maturing rapidly.
If you want to be spammed with notifications, there's nothing more reliable than multiple audited pieces of open source software that run directly on all your devices and monitor a public blockchain for an action. Add several third-party blockchain monitoring services for good measure.
And, of course, it's easy to write custody code in such a way that transfers are time-locked, so you have time to see the notification before the name changes owners. Write-once, audit-once, use-many.
> Have you actually ever done anything like that in real life?
Yes.
But aside from that, I use cryptographic keys in my life for countless reasons other than cryptocurrency. Git, SSH, E2E messaging apps, web passkeys, object storage, HTTPS server certificates, tapping my credit card at the supermarket, accessing the cell network, unlocking my car, etc. Everyone is already managing cryptographic keys whether they know it or not, and everyone's cell phone has keys already available and quite safe in its secure element, ready to sign messages with.
No need to break out the pocket protectors and meet up in someone's living room. A key signing ceremony for ENS could be easily piggybacked off a standard E2E group chat, like for example a Signal or iMessage chat:
* Someone creates a group chat on their smartphone and invites people (specifying the "M" value, aka the threshold for a valid group signature)
* The invited people join, their devices silently and automatically exchange keys, and the chat displays the group key
* Whoever has the asset transfers it to the group key
* Whenever someone proposes a message to sign, the system messages the group chat showing how many more signatures are needed, with a "sign" button that people can click.
This is pretty similar to what Safe Wallet already does, and it currently secures over $100 billion worth of cryptocurrency for some of the largest companies in the industry. But it's also quite simple to just download the app and use it as an end-user. It's directly compatible with ENS, since they both implement the ERC-721 token standard.
I've thought through all of this extensively, I know quite a lot of details about how both blockchains and the current DNS systems work, I've had numerous conversations with countless people about it, and it all adds up to me.
You can always hold the ENS in a multisig wallet, or hold it in a smart contract with whatever arbitrary custom logic you want.
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This comment is peculiar - among technologists, for years the common refrain I’ve heard is “Bitcoin makes no sense but the underlying block chain ideas are very useful”.
Of course the combination of signed transactions, common visible ledgers, introducing computational challenges to forgery, resiliency through consensus (kinda)… all the bits and pieces can be remixed into really interesting ideas.
Bitcoin, I still don’t get. More public, slower, more expensive, no fundamental utility, and still subject to nation-state interference?
Of course the combination of signed transactions, common visible ledgers, introducing computational challenges to forgery, resiliency through consensus (kinda)… all the bits and pieces can be remixed into really interesting ideas.
Bitcoin, I still don’t get. More public, slower, more expensive, no fundamental utility, and still subject to nation-state interference?
> This comment is peculiar - among technologists, for years the common refrain I’ve heard is “Bitcoin makes no sense but the underlying block chain ideas are very useful”.
That's because they have no idea what they're talking about. At a certain point you have to ask yourself why Bitcoin is worth $2T and no enterprise blockchain has ever taken off. How many years more of this trend is required to prove the "technologists" are wrong? It's already been 16 years.
And while I don't believe in appeal to authority, it's worth mentioning that I have been working in this field for pretty much my entire career and TA'd the first Stanford CS course on blockchains and crypto currencies in 2015. I very much know what I'm talking about and the people at Vanguard are blindly parroting what Deloitte and McKinsey are telling them about "blockchain".
That's because they have no idea what they're talking about. At a certain point you have to ask yourself why Bitcoin is worth $2T and no enterprise blockchain has ever taken off. How many years more of this trend is required to prove the "technologists" are wrong? It's already been 16 years.
And while I don't believe in appeal to authority, it's worth mentioning that I have been working in this field for pretty much my entire career and TA'd the first Stanford CS course on blockchains and crypto currencies in 2015. I very much know what I'm talking about and the people at Vanguard are blindly parroting what Deloitte and McKinsey are telling them about "blockchain".
It's all down to how money is issued. The tokens we have to work for are created effortless by bankers from nothing whenever they issue a loan, and then they charge interest on them. This value of the new tokens they create is sucked out of the ones in your bank account, pension etc. It's theft and it's about 7% year.
Gold didn't have this problem because it's issued through proof of work - you have to put in N kgs of gold worth of work to mine N kgs of gold. But it's a rock and in today's world we need a digital form.
Gold didn't have this problem because it's issued through proof of work - you have to put in N kgs of gold worth of work to mine N kgs of gold. But it's a rock and in today's world we need a digital form.
I’ve always wondered why there isn’t a general purpose blockchain ledger for businesses. It seems like it would make auditing simple since all of the entries would be cryptographically guaranteed to not be manipulated.
There is a general purpose ledger for business. It's called a SQL database
SQL database is mutable, right? One of the biggest features of blockchain tech is that it's almost completely immutable. Something happens and it happens forever and ever.
And legally backed by WORM media: write once read many.
The major problem is that private solutions (like consortium chains) offer privacy but no standardized interoperability or neutral root of trust, and public solutions (like Ethereum blobs) offer interoperability and neutrality but no inbuilt privacy.
I believe this will change either when consortium chains figure out the interoperability problem (so they can bridge seamlessly with public chains) or public chains figure out the privacy problem (allowing consensus over entirely private transaction zones).
To me it seems like the latter is more likely than the former. We've finally got both featureful/performant Ethereum roll-ups and private Ethereum roll-ups. Now the trick is to combine all those properties and bundle them into a business ledger that's high-performance, with customizable privacy zones, with consensus and data availability provided by a credibly neutral setup such as the Ethereum validator set.
This seems to be the direction some firms are going, for example Ernst & Young with their Nightfall product, and more recently their OpsChain Contract Manager to try to bring it to enterprise customers.
I believe this will change either when consortium chains figure out the interoperability problem (so they can bridge seamlessly with public chains) or public chains figure out the privacy problem (allowing consensus over entirely private transaction zones).
To me it seems like the latter is more likely than the former. We've finally got both featureful/performant Ethereum roll-ups and private Ethereum roll-ups. Now the trick is to combine all those properties and bundle them into a business ledger that's high-performance, with customizable privacy zones, with consensus and data availability provided by a credibly neutral setup such as the Ethereum validator set.
This seems to be the direction some firms are going, for example Ernst & Young with their Nightfall product, and more recently their OpsChain Contract Manager to try to bring it to enterprise customers.
It would only ensure entries haven't been manipulated after the fact, but not whether they were valid in the first place or if they reflect reality.
Bingo. If the human principals of a business are committed to cooking the books, no amount of technology can force them to be honest.
Auditing isn't typically about forcing people to be honest, it's about discovering when people haven't been honest and being able to attribute the fault to a specific bad actor.
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Append only, immutable and signed ledgers do exist actually.
Actual businesses don’t need any trustless, decentralized storage solution, because they already heavily rely on the state monopoly on violence and state recognization of the “business” as an entity in order to function. They gain nothing from using a blockchain ledger instead of a trusted source enforced by laws and contracts.
By using a blockchain ledger, you move source of truth to a private group of people who are the best at leveraging money to buy ASICs/GPUs and run the technical infrastructure.
Ironically, where you had 1 person = 1 vote (democracy), now this system favors the ultra-rich.
And it is presented as decentralized / free, but in reality, control is in the handful of very rich people.
No surprise that Trump, Musk and others are promoting it.
Ironically, where you had 1 person = 1 vote (democracy), now this system favors the ultra-rich.
And it is presented as decentralized / free, but in reality, control is in the handful of very rich people.
No surprise that Trump, Musk and others are promoting it.
Of all blockchains that have any current relevance, only Bitcoin runs on ASIC/GPU - all the rest are staked rather than mined.
Guaranteed by what mechanism? This is the fundamental problem.
>"cryptographically guaranteed to not be manipulated."
That is only achieved with bitcoin because of a security model that has financial value to the blocks, and a distributed system of nodes and financially-invested miners. As soon as you remove the valuable digital token from the system it all falls apart; people could just rewrite the blocks and back-date the timestamps. It's like a machine that needs all of the parts to make sense.
That is only achieved with bitcoin because of a security model that has financial value to the blocks, and a distributed system of nodes and financially-invested miners. As soon as you remove the valuable digital token from the system it all falls apart; people could just rewrite the blocks and back-date the timestamps. It's like a machine that needs all of the parts to make sense.
This assumes ideal, perfect data entry before reaching the ledger, and having immutable history doesn't prevent historical errors.
It really doesn't traditional accounting is built around the use of an immutable ledger. Historical errors are fixed with correction entries. There is also a multidimensional conception of time to support this. We capture both the date the entry is made in the ledger and also the real world date it is meant to apply to.
So if you overstate something in December 2024, you can enter a correcting transaction today for that.
The first, erroneous entry has both it's accounting and business dates in December 2024.
The second entry, correcting the first is made today and so has an accounting date of today and a business date of December 2024.
So if you overstate something in December 2024, you can enter a correcting transaction today for that.
The first, erroneous entry has both it's accounting and business dates in December 2024.
The second entry, correcting the first is made today and so has an accounting date of today and a business date of December 2024.
>seems like it would make auditing simple since all of the entries would be cryptographically guaranteed to not be manipulated
Just because you write that you own 5 million litres of olive oil or what have you on a chain doesn't prove you actually have it.
Just because you write that you own 5 million litres of olive oil or what have you on a chain doesn't prove you actually have it.
There was BigChainDB that tried to combine blockchains with SQL database, but it failed as it was too early.
The trick is that it must be triple accounting and the counterparty needs to share the ledger, which cannot be done without PK.
The trick is that it must be triple accounting and the counterparty needs to share the ledger, which cannot be done without PK.
I've worked on such a platform: Hyperledger from IBM et al. It was generic enough we could deploy our own "smart contract" / business logic layer via a Lisp dialect built in Go.
How would it make auditing simple? Auditors would still have to go out and count things to verify that the blockchain contents match assets and liabilities in the real world.
It’s just not an actual problem for most businesses.
Wasn't that AWS Quantum Ledger, which is closing down at the end of July?
Thought experiment: if you were tasked with creating an eventually consistent distributed database where the nodes were to be run by different organizations that didn't trust each other, with predefined validity constraints on the data of some sort, and a scheme for incentivizing the operators of said database to keep operating it long term, how would you propose doing that?
Hint: if you look at similar systems such as those used for certificate transparency logs, they look quite like...a blockchain.
Hint: if you look at similar systems such as those used for certificate transparency logs, they look quite like...a blockchain.
Thus, a problem in search of a solution. Who has asked for that exactly ?`It's been more than a decade and still no one has found an actually useful real-world application for blockchain besides gambling and money laundering.
I'm just a newb passing, but a self sustained decentralized 24/7 logic+network layer could be nice for stupid computational tasks like tracking physical items or updating multi-source (different services, different companies) data easily, which are often done at the human level today (even if 99% of the time it's not necessary and very wasteful). Again i'm not knowledgeable but when thinking of blockchains, I always have this in mind.
It can't track physical items, because you can always just lie about the data. Company A says "I put the jewels in box 1352", and Company B opens the box to receive a bunch of dish towels. Just because it's cryptographically verified, doesn't mean it has any semantic value.
If Company A and B already trust each other not to put bad data on the chain, then they also trust each other to just send emails back and forth, and you don't need a cryptographically verified blockchain. It secures the least important part of the process.
If Company A and B already trust each other not to put bad data on the chain, then they also trust each other to just send emails back and forth, and you don't need a cryptographically verified blockchain. It secures the least important part of the process.
But how would you do that with ~all companies ? it would be standardization and heterogeneity hell.
Why would the addition of blockchains help standardize things?
they standardize transport, verification, encryption at least, consensus too iiuc
No, they don't do any of that. There are 100 different blockchain implementations at least, and none of them are standardized across any of those metrics. Everything from the consensus mechanism to the packet format to the bytecode is different. The standard way to interop between the Tezos blockchain and the Polygon blockchain is to create a token on both sides and attach a tag saying "don't touch me I'm actually somewhere else".
The only way to standardize ~all companies would be to have them all run the same exact ledger system, and if it was easy enough to make them do that, it would be easy enough to have them standardize a different reporting system for the same purpose.
The only way to standardize ~all companies would be to have them all run the same exact ledger system, and if it was easy enough to make them do that, it would be easy enough to have them standardize a different reporting system for the same purpose.
i meant each but using a single one to host events and logic, not a multichain (yeah according to your input would be brittle at best)
IBM tried to do that (asset tracking for marine shipping) with some rather neat technology.
It sank like Titanic. Nobody was interested in it, turns out that companies are fine with emailing each other Excel sheets.
It sank like Titanic. Nobody was interested in it, turns out that companies are fine with emailing each other Excel sheets.
Yeah I think i remember stories about that, that said, a failed attempt doesn't mean future will not be different (nobody seeing programming languages evolution as comparison point). Neither will it means that a decentralized event chain store is the solution.. just saying it kinda felt like an interesting "small logic global network application layer" .. which felt way more efficient than the litany of different b2b apps.
Now that’s the 1m dollar question. Virtually no one
Sure, but that’s not a thing any actual business needs, except in rare, esoteric situations. For all actual business purposes, a centralized database is better fit for purpose (note that pretty much all finance runs, eventually, on centralized databases like the Fed’s ACH system and the Depository Trust Company. It’s fine.)
You cannot reply with a thought experiment to someone asking what real purpose a technology has. Provide a real example where this is needed/done
Tasked by whom? In pursuit of what goal?
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So interesting how your conclusion (which I strongly agree) is a bit of knowledge that can be obtained with diligence and research, however, it's a limitation of Bitcoin that it requires that level of diligence and research to understand.
Not really. I just means that it doesn't grow too fast for itself and gives people chance to accumulate it - its kind of poetic.
Ultimately it will just keep going up in price relative to everything else and people will invest simply based on that without understanding why - similar to the real estate investment market.
Ultimately it will just keep going up in price relative to everything else and people will invest simply based on that without understanding why - similar to the real estate investment market.
Typical Bitcoin maximalistic bullshit that pretends that the only worthwhile cryptocurrency will ever be Bitcoin, ignoring the fact that for example Monero is a superior currency (being actually fungible, a requirement for a currency).
I do agree that cryptocurrencies are the killer feature of the blockchain but other use cases do exist (like trustless timestamping).
I do agree that cryptocurrencies are the killer feature of the blockchain but other use cases do exist (like trustless timestamping).
The rare, correct Bitcoin take on HN.
What about ETH/SOL stablecoin USDC and the whole "the blockchain validators/stakers can run programs/smart contracts/instructions"?
None of the smart contracts have done anything materially useful without huge risk of scams, rug pulls, or enabling criminal activity (e.g. mixers for money laundering.) After a decade, there are no examples of widely used smart contracts or even long-running projects that haven't been fueled by boom and bust speculation cycles (e.g. NFTs.)
Every time there is a "code is law" gone wrong with large $ at stake, people immediately fall back to real life police. Because "code is law" is either a bad idea or immediately has to compromise to meet real human uses (for example, people forget their passwords all the time and not supporting password resets—which right now requires a centralized key store—is a non-starter.)
There is both a ton of money in crypto and it has completely failed to reach its promised potential.
The largest uses in the next half decade will continue to be scams, pump-and-dumps, speculative frenzies, and money laundering. We'll see shockingly open corruption with the president of the United States having a coin for on-chain bribery.
Every time there is a "code is law" gone wrong with large $ at stake, people immediately fall back to real life police. Because "code is law" is either a bad idea or immediately has to compromise to meet real human uses (for example, people forget their passwords all the time and not supporting password resets—which right now requires a centralized key store—is a non-starter.)
There is both a ton of money in crypto and it has completely failed to reach its promised potential.
The largest uses in the next half decade will continue to be scams, pump-and-dumps, speculative frenzies, and money laundering. We'll see shockingly open corruption with the president of the United States having a coin for on-chain bribery.
> After a decade, there are no examples of widely used smart contracts or even long-running projects that haven't been fueled by boom and bust speculation cycles
MakerDAO, Aave, Uniswap, Ethereum Name Service, and OpenSea are all long-running smart contract projects that have weathered multiple speculation cycles chugging along all the same.
> Every time there is a "code is law" gone wrong with large $ at stake, people immediately fall back to real life police.
It's one potential recourse. As opposed to legal contracts, where falling back to real life police is the only recourse.
Code is not law, but it does solve the "possession is 9/10 of the law" issue by aligning possession with legal ownership more closely than legal contracts do, so that the law has to get involved a lower percentage of the time. This is especially helpful for low-value contracts in the hundreds of dollars or less where it's not economical to involve a lawyer. Same for cross-border contracts where international litigation is infeasible.
> There is both a ton of money in crypto and it has completely failed to reach its promised potential.
Smart contract tooling has only been mature since about 2018 or so. Blockchains have only started scaling since about 2021. Coinbase, the largest cryptocurrency-related company, didn't launch their chain until 2023. Sharded data availability won't even be in production on a major blockchain until next year, with Ethereum's PeerDAS. Zero knowledge proof technology is both in its infancy and developing extremely rapidly. In other words a text-based browser isn't going to host a video stream over a dial-up connection. These roadmaps are long, and it takes time for new breakthroughs in math and computer science to mature, standardize and reach production.
> The largest uses in the next half decade will continue to be scams, pump-and-dumps, speculative frenzies, and money laundering.
The "largest" uses aren't really relevant unless you're trying to make an overarching moral judgement and say "blockchains are bad", which whether true or not, I think is an observation about as useless as "knives can be used to hurt people".
If you're trying to determine whether a tool has any legitimate helpful uses, look for an increase in its legitimate helpful uses.
MakerDAO, Aave, Uniswap, Ethereum Name Service, and OpenSea are all long-running smart contract projects that have weathered multiple speculation cycles chugging along all the same.
> Every time there is a "code is law" gone wrong with large $ at stake, people immediately fall back to real life police.
It's one potential recourse. As opposed to legal contracts, where falling back to real life police is the only recourse.
Code is not law, but it does solve the "possession is 9/10 of the law" issue by aligning possession with legal ownership more closely than legal contracts do, so that the law has to get involved a lower percentage of the time. This is especially helpful for low-value contracts in the hundreds of dollars or less where it's not economical to involve a lawyer. Same for cross-border contracts where international litigation is infeasible.
> There is both a ton of money in crypto and it has completely failed to reach its promised potential.
Smart contract tooling has only been mature since about 2018 or so. Blockchains have only started scaling since about 2021. Coinbase, the largest cryptocurrency-related company, didn't launch their chain until 2023. Sharded data availability won't even be in production on a major blockchain until next year, with Ethereum's PeerDAS. Zero knowledge proof technology is both in its infancy and developing extremely rapidly. In other words a text-based browser isn't going to host a video stream over a dial-up connection. These roadmaps are long, and it takes time for new breakthroughs in math and computer science to mature, standardize and reach production.
> The largest uses in the next half decade will continue to be scams, pump-and-dumps, speculative frenzies, and money laundering.
The "largest" uses aren't really relevant unless you're trying to make an overarching moral judgement and say "blockchains are bad", which whether true or not, I think is an observation about as useless as "knives can be used to hurt people".
If you're trying to determine whether a tool has any legitimate helpful uses, look for an increase in its legitimate helpful uses.
stablecoins are useful but you don't really need a blockchain. you just need enough of a rube-goldberg machine to claim it's "decentralized". The most popular "blockchain" for stablecoins is Tron, if that tells you anything about why the technology itself doesn't matter
The blockchain can't do anything with stablecoins, because that's interfacing with a financial system that's out of the reach of smart contracts. Even if we assume that a stablecoin is backed by real USD sitting in a bank account, there's nothing stopping anyone from just taking money out of the bank account, and the smart contract is none the wiser. You still have to trust someone at the end of the day.
Problem with stablecoins is that in reality they are just extremely fancy IOUs or namely debt. Issuer promises to give money back. And if they don't well best you can do is to sue them.
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Do you think cash will still be a thing a hundred years from now? Do you think the cocaine trade, tax evasion, illegal gambling, money laundering etc. will still be a thing in a hundred years?
Personally my "bull case" for crypto is that I am pretty confident about answering no and yes to those two questions, respectively.
I'm being cynical, but I also think that's true.
I haven't owned any crypto in a long time and won't going forward.
Personally my "bull case" for crypto is that I am pretty confident about answering no and yes to those two questions, respectively.
I'm being cynical, but I also think that's true.
I haven't owned any crypto in a long time and won't going forward.
> Do you think cash will still be a thing a hundred years from now?
Do you think you will be alive hundred years from now?
Do you think you will be alive hundred years from now?
No, but their children or a worthy inheritor will be. There’s reasons to make investments which exceed your lifespan.
With that in mind, I would certainly say the choice for those won't be pseudo anonymous currency. As one sting operation and someone keeping too many records will get plenty of people discovered.
Not mentioned but a good reason is Bogle fucking hated crypto (some might say, with good reason).
> I would say avoid bitcoin like the plague. Did I make myself clear?
> I would say avoid bitcoin like the plague. Did I make myself clear?
Sounds like they are more interested in Ethereum
So generally I agree with this. But I will note the following:
1) Vanguard offers Gold ETFs. Now they would say something ike 'oh that's because gold is used as an actual product ie has a purpose'. But most people accept that gold is also speculative and is the way it is simply because it's been that way for such a long time vs. it's inherent value or purpose. Yes the swings are not as wild and not as easily manipulated (there was the situation with Silver that was years ago) but still it could be done.
2) Stock investing is by and large gambling and whatever income the stock owns in no way really flows measuably to the person who owns stock in the company but seems to drive some type of accepted value going forward. No it's not entirely chance (like traditional gambling) but there are many players and much skill level and 'the regular guy' is not in a position to compete so they must interpret signals and they don't have access to all the signals that a higher level investor does.
3) The entire 'long term' for stock is similar mantra to HODL with crypto.
4) The 'problem' with both crypto and stocks is not really when to buy but when to sell.
1) Vanguard offers Gold ETFs. Now they would say something ike 'oh that's because gold is used as an actual product ie has a purpose'. But most people accept that gold is also speculative and is the way it is simply because it's been that way for such a long time vs. it's inherent value or purpose. Yes the swings are not as wild and not as easily manipulated (there was the situation with Silver that was years ago) but still it could be done.
2) Stock investing is by and large gambling and whatever income the stock owns in no way really flows measuably to the person who owns stock in the company but seems to drive some type of accepted value going forward. No it's not entirely chance (like traditional gambling) but there are many players and much skill level and 'the regular guy' is not in a position to compete so they must interpret signals and they don't have access to all the signals that a higher level investor does.
3) The entire 'long term' for stock is similar mantra to HODL with crypto.
4) The 'problem' with both crypto and stocks is not really when to buy but when to sell.
> Vanguard offers Gold ETFs. Now they would say something ike 'oh that's because gold is used as an actual product ie has a purpose'. But most people accept that gold is also speculative and is the way it is simply because it's been that way for such a long time vs. it's inherent value or purpose.
Bogle was kind of a gold bug. It's unsatisfying and inconsistent and I agree you could make a similar argument for excluding gold if it wasn't already kind of grandfathered in.
> Stock investing is by and large gambling and whatever income the stock owns in no way really flows measuably to the person who owns stock in the company but seems to drive some type of accepted value going forward.
No, stock investing and gambling are absolutely incomparable. Income clearly and directly flows to owners; it's not obscure.
Bogle was kind of a gold bug. It's unsatisfying and inconsistent and I agree you could make a similar argument for excluding gold if it wasn't already kind of grandfathered in.
> Stock investing is by and large gambling and whatever income the stock owns in no way really flows measuably to the person who owns stock in the company but seems to drive some type of accepted value going forward.
No, stock investing and gambling are absolutely incomparable. Income clearly and directly flows to owners; it's not obscure.
> that gold is also speculative
gold has stayed as a value of store that is tradeable, longer than any civilization has existed.
USD or Stocks or Bonds for that matter any other currency is 1000x more speculative than gold
Gold is also a “commodity” which vanguard stated has inflation protection properties
If Satoshi Nakamoto’s Dormant BTC wallet wakes up tomorrow it’ll burn down the whole market…
gold has stayed as a value of store that is tradeable, longer than any civilization has existed.
USD or Stocks or Bonds for that matter any other currency is 1000x more speculative than gold
Gold is also a “commodity” which vanguard stated has inflation protection properties
If Satoshi Nakamoto’s Dormant BTC wallet wakes up tomorrow it’ll burn down the whole market…
Investing in a company is not the same as gambling. It looks like gambling, because like gambling it carries risk, and the stock market is so liquid that the fact that you're investing in a business is abstracted away. But it is fundamentally different from gambling, because you are providing capital for activities you expect to be productive.
Imagine you know a skilled chef, whose new restaurant is losing money, but you believe he can turn it around and start being profitable if he is able to keep operating for another few months. You buy 10% of his business for $100k, so that he can keep paying rent and wages. Your thesis is correct and his restaurant becomes popular and profitable, and you share in the profits. New value is created (a thriving business, providing food and jobs) that would not have existed without the capital you provided.
Did you take a risk? Yes. Were you just gambling? No. In contrast, there's no scenario where betting on a sports game or memecoin creates new real-world economic value.
Imagine you know a skilled chef, whose new restaurant is losing money, but you believe he can turn it around and start being profitable if he is able to keep operating for another few months. You buy 10% of his business for $100k, so that he can keep paying rent and wages. Your thesis is correct and his restaurant becomes popular and profitable, and you share in the profits. New value is created (a thriving business, providing food and jobs) that would not have existed without the capital you provided.
Did you take a risk? Yes. Were you just gambling? No. In contrast, there's no scenario where betting on a sports game or memecoin creates new real-world economic value.
Stock investing has upward bias due to productivity. Also inflation offset. You can check long term S&P growth since inception. Stock market has positive EV on average. It's a positive sum game.
Sports betting or gambling has nevative EV and you lose more (on average) than you win.
So they are like night and day.
Even if the diffrence is 49.9% odds versus 51.01% odds that is worlds apart when it comes to laws of large numbers.
Sports betting or gambling has nevative EV and you lose more (on average) than you win.
So they are like night and day.
Even if the diffrence is 49.9% odds versus 51.01% odds that is worlds apart when it comes to laws of large numbers.
Tesla stock is worth more than the top 14 auto makers around the world, speaking about gambling speculative assets.
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I’m shocked to see that most criticism here is not about bitcoin being funny internet money run by self interested people, but is instead that stable currency and storing value are bad.
The problem is that if btc is a once in a 200 year “creation of a global reserve currency” event, those with bitcoin exposure (even 1% of portfolio or whatever) will be minted and those without will be fighting over the scraps.
You can buy insurance to ensure you’re not left behind this very cheaply, for just 1% of your portfolio. Yes, it is coordination dilemma with ponzi characteristics. Yes, sticking to your principles may feel like the intellectually correct thing to do. But its a big coordination dilemma which so far is only going in one direction, and the risk that anyone not getting involved ends up having fun staying poor increases as btc ascends.
You can buy insurance to ensure you’re not left behind this very cheaply, for just 1% of your portfolio. Yes, it is coordination dilemma with ponzi characteristics. Yes, sticking to your principles may feel like the intellectually correct thing to do. But its a big coordination dilemma which so far is only going in one direction, and the risk that anyone not getting involved ends up having fun staying poor increases as btc ascends.
I don’t really see how/why/etc Bitcoin would achieve that use case. If governments and financial institutions aren’t bag holders then they are extremely financially motivated to stop that from occurring, and afaik those groups aren’t holding huge Bitcoin reserves (maybe fidelity is, or at least was).
Meanwhile, Huawei Harmony just embedded the digital yuan at the system level.
All the ETFs mean is that it will be so much easier to get out of the position and cause even bigger cascades of selling than before when the next shock happens.
You can't have a reserve currency with an asset that has so much volatility it can't even function as a currency.
All the ETFs mean is that it will be so much easier to get out of the position and cause even bigger cascades of selling than before when the next shock happens.
You can't have a reserve currency with an asset that has so much volatility it can't even function as a currency.
This seems like a comment from 10 years ago. In 2025, Larry Fink just announced he's a "big believer" at Davos, and the President of the United States ordered his team to evaluate creating a huge reserve.
> those with bitcoin exposure (even 1% of portfolio or whatever) will be minted and those without will be fighting over the scraps.
Why? There’s no way to derive value from that use.
There actually would be if it were, say, Ethereum (which is proof of stake, with fees accruing to holders). However, let’s say Ethereum were to become a global reserve currency. This would be essentially a tax on all financial activity, and governments and companies would be _strongly_ incentivised to create an alternative which they controlled and which did not have that tax. Something a _bit_ like this, incidentally, has already happened. Prior to the creation of SWIFT, international bank transfers generally went through what is now Citibank. Governments, and banks other than Citibank, generally saw this as unsatisfactory (even though AIUI Citibank was doing it extremely cheaply and not deriving all that much value from it; the mere threat that they _might_ was enough) and thus SWIFT was born.
Why? There’s no way to derive value from that use.
There actually would be if it were, say, Ethereum (which is proof of stake, with fees accruing to holders). However, let’s say Ethereum were to become a global reserve currency. This would be essentially a tax on all financial activity, and governments and companies would be _strongly_ incentivised to create an alternative which they controlled and which did not have that tax. Something a _bit_ like this, incidentally, has already happened. Prior to the creation of SWIFT, international bank transfers generally went through what is now Citibank. Governments, and banks other than Citibank, generally saw this as unsatisfactory (even though AIUI Citibank was doing it extremely cheaply and not deriving all that much value from it; the mere threat that they _might_ was enough) and thus SWIFT was born.
Also, the “blockchain not bitcoin” talking point in 2025 is cringe.
no inherent economic value
As in: Do they mean that the existence of the Bitcoin blockchain has no economic value, or that owning Bitcoin tokens has no value?
Both have value though. If you want to store data publicly and tamperproof for a long time, the Bitcoin blockchain is by far the best solution. So the Bitcoin blockchain has value. And the Bitcoin token lets you use the Bitcoin blockchain. Without Bitcoin tokens, there is no way you can write anything to the Bitcoin blockchain.
>If you want to store data publicly and tamperproof for a long time, the Bitcoin blockchain is by far the best solution. //
Don't you get 80 bytes per transaction? That seems like about $7M per GB... maybe storing hashes is reasonable but storing data actually on the bitcoin blockchain itself doesn't seem great?
Don't you get 80 bytes per transaction? That seems like about $7M per GB... maybe storing hashes is reasonable but storing data actually on the bitcoin blockchain itself doesn't seem great?
Hashes are a good example of a very small amount of data that is very powerful. By storing a single hash, you can notarize an infinite amount of documents.
Another very powerful type of data is transaction settlements. With a single onchain transaction, an infinite amount of second layer transactions can be settled.
Another very powerful type of data is transaction settlements. With a single onchain transaction, an infinite amount of second layer transactions can be settled.
It's not something Vanguard would do, but I'm wondering if there's a good way to trade on Bitcoin's volatility?
Matt Levine has written about how buying convertible bonds from Microstrategy is sort of doing this [1] but it seems complicated to do.
> This is the more practical meaning of hedging your stock-price risk. It means that every day the stock moves around and you rebalance your hedge. When the stock goes up, you sell some stock at high prices. When the stock goes down, you buy some stock at low prices. Hedging the convertible means buying stock low and selling it high.
...
> a convertible bond is a bet on volatility: The more the company’s stock bounces around, the more money convertible arbitrageurs can make.
[1] https://archive.is/S9kOi
Matt Levine has written about how buying convertible bonds from Microstrategy is sort of doing this [1] but it seems complicated to do.
> This is the more practical meaning of hedging your stock-price risk. It means that every day the stock moves around and you rebalance your hedge. When the stock goes up, you sell some stock at high prices. When the stock goes down, you buy some stock at low prices. Hedging the convertible means buying stock low and selling it high.
...
> a convertible bond is a bet on volatility: The more the company’s stock bounces around, the more money convertible arbitrageurs can make.
[1] https://archive.is/S9kOi
Yes, you could trade options on Bitcoin futures, or options on Bitcoin ETFs. You could buy calls and puts, which would make you "positively exposed" to volatility - i.e. if people's expectation of volatility goes up, the price should go up. By "delta" hedging them every so often you could "realize" some of that volatility - you would be buying when the price goes down, selling when the price goes up.
Of course, this is all baked into the option price itself, so its not "free money" - its a bet.
I'm certainly not going to do that, but I'm wondering if there are ETF's doing something like that. Aren't there ETF's for everything these days?
Maybe, but I’d stay very far away from bitcoin options or any funds that deal in them. They are likely paying a lot in fees and taking hidden risks that will be passed on to shareholders.
> I'm wondering if there's a good way to trade on Bitcoin's volatility?
It is with options on MicroStrategy (MSTR). I think one strategy is holding MSTR and selling calls (i.e. covered calls). There are probably other strategies that don't require holding MSTR shares, like selling a call and buying a put, but I may be messing that up.
Check out the youtube channel called "Quant Bros" (cringe name, I know), and the /r/MSTR subreddit.
It is with options on MicroStrategy (MSTR). I think one strategy is holding MSTR and selling calls (i.e. covered calls). There are probably other strategies that don't require holding MSTR shares, like selling a call and buying a put, but I may be messing that up.
Check out the youtube channel called "Quant Bros" (cringe name, I know), and the /r/MSTR subreddit.
You can buy options. Though one thing to be aware of is counterparty risk. If bitcoin were ever to go to its true value (ie ~0), then you might find that your put options have also become valueless, because the providers of such options are, by and large, horribly exposed in such a scenario.
It is also likely to be very _expensive_, and the market can of course stay irrational longer than you can remain solvent.
It is also likely to be very _expensive_, and the market can of course stay irrational longer than you can remain solvent.
Check out the rainbow chart https://www.blockchaincenter.net/en/bitcoin-rainbow-chart/
Buy when it's blue sell when it's orange.
Buy when it's blue sell when it's orange.
As the price of digital currency goes up, the number of hit pieces from banking industry increases proportionately.
I know it's more fun to believe there is a sinister conspiracy among the financial industry to keep bitcoin down when it starts to go up, but occam's razor here is that these firms get asked more about bitcoin/crypto/etc. when retail interest is up which also tends to be when the prices go up.
Yeah what would they know about risk analysis. You're defo smarter.
AI seems like a better use case for all the GPU and energy that goes to bitcoin mining.
And this is why I'm glad I mostly invest with Vanguard
Bitcoin at its fundamental is a large pyramid scheme where you need new fools to keep on buying at an ever higher price.
The current newest fool is President Trump who wants to take a portion of Federal reserve and put it in Bitcoin. The greatest fool one would say.
And when Bitcoin has a 50% decline due to a scare pullout, the federal reserve also has a pullout and ……… the entire economy tanks.
The market is so hot right now with absurd P/E ratios. One bad nvidia earnings and we’re gonna be in bearish mode.
The current newest fool is President Trump who wants to take a portion of Federal reserve and put it in Bitcoin. The greatest fool one would say.
And when Bitcoin has a 50% decline due to a scare pullout, the federal reserve also has a pullout and ……… the entire economy tanks.
The market is so hot right now with absurd P/E ratios. One bad nvidia earnings and we’re gonna be in bearish mode.
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Who would be buying bitcoin right now? The price steadily went up after sanctioned countries removed from SWIFT started settling their transactions in Bitcoin.
It exploded after the US election after it became clear that the crypto bros are in charge. It is now theoretically possible to buy a president by launching a new coin and have the "lobbyists" buy the coin. Previously this needed to be done using high speaker fees and book deals after the presidency.
If the wars and sanctions stop and if more people are aware of the oligarch influence, Bitcoin will drop.
Trump is continuing the Blinken policies in Gaza (make the Palestinians leave to Jordan and Egypt and build Kushner seafront properties in Gaza) and the Bolton policies in Greenland. So perhaps he'll continue the Blinken policies in Ukraine, too, despite election promises to the contrary. That is the only hope for the Bitcoin scam.
It exploded after the US election after it became clear that the crypto bros are in charge. It is now theoretically possible to buy a president by launching a new coin and have the "lobbyists" buy the coin. Previously this needed to be done using high speaker fees and book deals after the presidency.
If the wars and sanctions stop and if more people are aware of the oligarch influence, Bitcoin will drop.
Trump is continuing the Blinken policies in Gaza (make the Palestinians leave to Jordan and Egypt and build Kushner seafront properties in Gaza) and the Bolton policies in Greenland. So perhaps he'll continue the Blinken policies in Ukraine, too, despite election promises to the contrary. That is the only hope for the Bitcoin scam.
The real reason: there are 7 other ETFs to pick from and Vanguard has no way to differentiate itself.
If it were that simple, Vanguard wouldn't have taken the additional step to prevent trading in these products on their brokerage. Telling customers "you can't buy Bitcoin because we can't sell it to you at a profit" would be ridiculous.
Do you think Vanguard has any reason to lie about their motivations here? Do you think their S&P500 MF/ETF distinguishes itself in any way from Fidelity's or is a motivating factor for having one? This is just a bizarre conspiracy theory to espouse on the basis of no evidence.
Being anti-cryptocurrency as an organisation really is an important differentiator.
Fidelity knows that investors in their cryptocurrency products will lose money in aggregate, but offers them anyway. It's a black mark against their integrity.
Fidelity knows that investors in their cryptocurrency products will lose money in aggregate, but offers them anyway. It's a black mark against their integrity.
The killer use cases of crypto are not visible to HN readers living in relatively stable North American or European countries. Take a look at the the "Global Crypto Adoption Index Top 20" [1] for the past years and ask yourself, "do Vietnamese people love trading monkey gifs? Are Ukrainians especially susceptible to Ponzi schemes? Is Venezuela laden with techbros?" [2]
No. It's that people in many of the countries in the top 20 live under unstable governments and monetary systems, with extreme debasement, inflation, inability to store value without seizure, transfer value without controls, accept remittances, etc. Crypto absolutely has use cases in these situations, and these extremes inform the means.
"If you’re in a developed country, and you’re happy with your banking system, and you’re not a sex worker, and you have zero concerns about your country being taken over by fascists, you probably don’t need cryptocurrency and shouldn’t worry about it. If other people say they do need it, don’t call them liars and say you know with certainty that nobody has ever used crypto for anything besides Ponzi schemes and monkey pictures. Just let them use it!" [2]
[1] https://www.chainalysis.com/blog/2024-global-crypto-adoption...
[2] https://www.astralcodexten.com/p/why-im-less-than-infinitely...
No. It's that people in many of the countries in the top 20 live under unstable governments and monetary systems, with extreme debasement, inflation, inability to store value without seizure, transfer value without controls, accept remittances, etc. Crypto absolutely has use cases in these situations, and these extremes inform the means.
"If you’re in a developed country, and you’re happy with your banking system, and you’re not a sex worker, and you have zero concerns about your country being taken over by fascists, you probably don’t need cryptocurrency and shouldn’t worry about it. If other people say they do need it, don’t call them liars and say you know with certainty that nobody has ever used crypto for anything besides Ponzi schemes and monkey pictures. Just let them use it!" [2]
[1] https://www.chainalysis.com/blog/2024-global-crypto-adoption...
[2] https://www.astralcodexten.com/p/why-im-less-than-infinitely...
The actual use case of crypto is censorship resistance, money laundering and sanction evasion. In a multipolar world, none of those are going away anytime soon, so crypto is here to stay.
Why is this the case? I mean buying crypto via a ?local? exchange is possible, but it is not possible to buy a more stable currency. How is the crypto bought, does someone sell it in that local currency? Because if not, you still need zo transfer your currency to (in >90% of cases) USD and then buy crypto. So why not just use those (the same way everybody else does).
If you mean to hold USD-denominated deposits in a local bank, the local government can easily confiscate or convert them. Numerous such examples.
If you mean to hold USD paper notes, that does happen a lot all over the world as you say; and not necessarily legally. Many advantages to digitization (and some disadvantages).
If you mean to hold USD paper notes, that does happen a lot all over the world as you say; and not necessarily legally. Many advantages to digitization (and some disadvantages).
I'm anti-crypto and this kind of crypto advocacy I actually agree with. It's not as sound as the US dollar, but there are much less stable currencies.
> concerns about your country being taken over by fascists,
.. do not record all your transactions on a permanent public leger!
> concerns about your country being taken over by fascists,
.. do not record all your transactions on a permanent public leger!
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And yet it still grows
TL;DR - We think it's essentially gambling and not fit for a long term portfolio.
I agree.
I agree.
In sense investing is gambling. But at least you can make informed decision on what you think go up or down in value based on real world. Where as crypto is purely speculative with no actual tie to economy or anything.
What does make it different than let's say Gold?
Bitcoin has a really good and nice use case, you can move millions of dollars between countries with words in your head. No customs will ever find out. Can Gold, diamonds or even paper dollars do that?
You can hit met with the ethics subject but another matter.
Bitcoin has a really good and nice use case, you can move millions of dollars between countries with words in your head. No customs will ever find out. Can Gold, diamonds or even paper dollars do that?
You can hit met with the ethics subject but another matter.
andrewfromx(12)
All valid points, but let's remember that most other stonks trade at some 40x of the value of the company.
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meanwhile my self-custodied solo 401k roth funds 2x'd on Unicorn Fart Dust - a meme coin that's supposed to be making fun of how people in this community view crypto - and 3x'd on $TRUMP, and then 2x'd again LPing on $TRUMP as a market maker on Meteora. all tax freeeeee
it isn't important to me that this is speculation versus some form of financial game that's put on a mental pedestal
it is important to me that this fits my risk profile
generic advice gives generic results
it isn't important to me that this is speculation versus some form of financial game that's put on a mental pedestal
it is important to me that this fits my risk profile
generic advice gives generic results
Christopher Columbus reached the Americas in 1492. He traded colourful beads and small mirrors. In return he got gold. Both the indigenous people and the Spaniards thought of each other as fools.
Value does not arise out of usage or cash flow or how something is classified or even its history. Value arises out of perception. Its all a narrative. It always has been.
People thinking crypto is useless is a narrative. People thinking money will always lose value due to inflation is a narrative. Both are true based on your point of perception.
Value does not arise out of usage or cash flow or how something is classified or even its history. Value arises out of perception. Its all a narrative. It always has been.
People thinking crypto is useless is a narrative. People thinking money will always lose value due to inflation is a narrative. Both are true based on your point of perception.
Well said, this has been my own thinking on crypto, nice to see it so succinctly summarized.