What the Crypto Crowd Doesn’t Understand About Economics(bloomberg.com)
bloomberg.com
What the Crypto Crowd Doesn’t Understand About Economics
https://www.bloomberg.com/opinion/articles/2021-06-21/what-the-crypto-crowd-doesn-t-understand-about-economics
87 comments
Isn't this just the Greater Fool Theory [1]
[1] https://www.investopedia.com/terms/g/greaterfooltheory.asp
[1] https://www.investopedia.com/terms/g/greaterfooltheory.asp
Most people in crypto do not understand anything about economics. They understand ponzi/ greater fool theory and how to obfuscate to the public and regulators to pull the wool over someone's eyes.
Ok, but please don't post unsubstantive comments to HN and especially not flamewar comments. They're predictable and they make the threads nasty.
https://news.ycombinator.com/newsguidelines.html
https://news.ycombinator.com/newsguidelines.html
Most people do not understand anything about economics-in fact most economics is a work in progress.
I'd go farther and take the Taleb route that NOBODY understands economics due to its random nature.
Thomas Sowell seems to have a solid grasp on economics. Too bad people don't study his work. Maybe if he wasn't black people in the US would listen to him.
Please stop taking HN threads further into ideological flamewar. We don't want that here; it's tedious, predictable, and regularly turns nasty.
https://news.ycombinator.com/newsguidelines.html
https://news.ycombinator.com/newsguidelines.html
Thomas Sowell is a great great thinker. People do not study his work because it doesn't fit well with MMT and the micromanaging of an economy. Not because he is black. This obsession with race is ridiculous.
This is an outrageous statement.
Thomas Sowell is a widely cited and studied economist. Many people study his work (including myself!). What does his being black have to do with anything? There is no group of people ignoring him for being black.
In fact, the contemporary politics would suggest that, since he's black, he'd be democrat, but his economics are very libertarian, a group more associated with racists. So what are you on about?
People don't "listen" to him because he's incredibly biased towards free-market economics, not because his skin color.
Thomas Sowell is a widely cited and studied economist. Many people study his work (including myself!). What does his being black have to do with anything? There is no group of people ignoring him for being black.
In fact, the contemporary politics would suggest that, since he's black, he'd be democrat, but his economics are very libertarian, a group more associated with racists. So what are you on about?
People don't "listen" to him because he's incredibly biased towards free-market economics, not because his skin color.
this is true, its also problematic because you're studying a system that not only constantly changes but will also change based on the fact that you observe and report on it.
Is there a workaround for this paywall?
I just spent a couple of minutes in dev tools deleting about 50 script, iframe and div tags that didn't contain the actual text. Then remove the "overflow:hidden" css style on the top div.
Utterly miserable waste of everyone's bandwidth. But that's media for you...
Utterly miserable waste of everyone's bandwidth. But that's media for you...
Right?! They seem desperate for income, I can't figure out why.
Oh here's a link to skip paying them for a subscription btw.
Oh here's a link to skip paying them for a subscription btw.
It's not the business model I object to. Though they'll probably need to do something different to actually make it work: you can't write clickbaity shite that optimises for ad revenue and then expect people to pay for it.
It's the horrible inefficiency and ineffectiveness of their markup that I object to. Megabytes of script and tags that achieves nothing except using up bandwidth and cpu cycles. Why are there 3 iframes (iirc) in there? Why are there so many script tags? Can't they use a packer? It's all so badly done.
It's the horrible inefficiency and ineffectiveness of their markup that I object to. Megabytes of script and tags that achieves nothing except using up bandwidth and cpu cycles. Why are there 3 iframes (iirc) in there? Why are there so many script tags? Can't they use a packer? It's all so badly done.
Yeah, why optimize for ad revenue when they have a paywall?!
Sounds like you went through a lot of work to read that "clickbaity shite." It's not worth paying for, surely it's not worth the time you spent doing that?
Sounds like you went through a lot of work to read that "clickbaity shite." It's not worth paying for, surely it's not worth the time you spent doing that?
I used to run a newspaper. The business model question is very hard.
There's basically a choice:
You can write clickbaity ad-revenue-optimised shite, which draws people in, gets them to open the article (and get served the ads). But once they've done that then there's no point in getting them engaged further - from a business point of view there's nothing gained by getting them to read stuff once the ads have been served. So you target the journos for 5 articles a day, minimum, knowing that that's not enough time for them to write decent articles, and get your editors to make the headers clickbaity. Job done. Except ad revenue is declining year-on-year and you're trashing your reputation for journalism.
Or you can do "proper" journalism, which involves paying journalists for good articles, investigative journalism, Pulitzer prize stuff. It costs a fortune. It's not worth doing for ad revenue because the clickbaity stuff actually earns more money. But it does increase your reputation. And if you get your reputation high enough, people will start paying to access the stuff you're writing.
At least that's the theory. No-one (as far as I'm aware) has actually made a profit from either model since about 2000. The Guardian has done very well out of the Wikipedia model, but all the opinions I hear is that that's probably not sustainable, and is anyway very specific to them because they cater to a niche that is very politically aware and fairly well-off. i.e. they have money to spare to support the Grauniad, and identify with its political stance.
So, yes, optimising for ad revenue when you have a paywall is stupid - people who are drawn there by the clickbait header won't pay the paywall. And people who have paid for the paywall will be annoyed if the article is optimised for clickbait (ad-revenue). I hope that makes sense? Let me know if not and I can explain it again.
I'm a geek, I enjoy messing with this stuff. The enjoyment of the technical challenge of "hacking" their paywall was more than worth the time it took. The article was probably not. Not sure I'd do it again.
There's basically a choice:
You can write clickbaity ad-revenue-optimised shite, which draws people in, gets them to open the article (and get served the ads). But once they've done that then there's no point in getting them engaged further - from a business point of view there's nothing gained by getting them to read stuff once the ads have been served. So you target the journos for 5 articles a day, minimum, knowing that that's not enough time for them to write decent articles, and get your editors to make the headers clickbaity. Job done. Except ad revenue is declining year-on-year and you're trashing your reputation for journalism.
Or you can do "proper" journalism, which involves paying journalists for good articles, investigative journalism, Pulitzer prize stuff. It costs a fortune. It's not worth doing for ad revenue because the clickbaity stuff actually earns more money. But it does increase your reputation. And if you get your reputation high enough, people will start paying to access the stuff you're writing.
At least that's the theory. No-one (as far as I'm aware) has actually made a profit from either model since about 2000. The Guardian has done very well out of the Wikipedia model, but all the opinions I hear is that that's probably not sustainable, and is anyway very specific to them because they cater to a niche that is very politically aware and fairly well-off. i.e. they have money to spare to support the Grauniad, and identify with its political stance.
So, yes, optimising for ad revenue when you have a paywall is stupid - people who are drawn there by the clickbait header won't pay the paywall. And people who have paid for the paywall will be annoyed if the article is optimised for clickbait (ad-revenue). I hope that makes sense? Let me know if not and I can explain it again.
I'm a geek, I enjoy messing with this stuff. The enjoyment of the technical challenge of "hacking" their paywall was more than worth the time it took. The article was probably not. Not sure I'd do it again.
I believe there are plenty of examples of profitable news organizations. They all generally sit in the 'patronage' category as you described/ala The Guardian.
The New York Times is the first one that comes to mind: https://www.wsj.com/market-data/quotes/NYT/company-people
The economist is very profitable: https://www.economistgroup.com/pdfs/Annual_Report_2021.pdf
And lastly, (while I'm sure there are more), I believe Conde Nast has said the New Yorker is also profitable.
The New York Times is the first one that comes to mind: https://www.wsj.com/market-data/quotes/NYT/company-people
The economist is very profitable: https://www.economistgroup.com/pdfs/Annual_Report_2021.pdf
And lastly, (while I'm sure there are more), I believe Conde Nast has said the New Yorker is also profitable.
I know, my first question was a joke; you're causing clickbaity headlines and inline ads by bypassing their paywall. You still haven't explained why it was worth your time to manually edit the frontend in Inspector when the article is such poor quality it's not worth paying for.
Google and Facebook ate the ad market. It doesn't matter if you win Pulitzer prizes or not, you need another source of revenue.
There's plenty of profitable paywall models, Wired, NYT, Economist. You haven't heard about any of the profitable models in the last 20 years?!
Google and Facebook ate the ad market. It doesn't matter if you win Pulitzer prizes or not, you need another source of revenue.
There's plenty of profitable paywall models, Wired, NYT, Economist. You haven't heard about any of the profitable models in the last 20 years?!
> I'm a geek, I enjoy messing with this stuff. The enjoyment of the technical challenge of "hacking" their paywall was more than worth the time it took. The article was probably not. Not sure I'd do it again.
I kinda did. You're obviously more interested in making "jokes" than reading the replies.
I do make a distinction between straight "news" sites and the more niche sites like the Economist, Wired, etc. I wasn't aware that NYT was now profitable via paywall - last I heard it was still struggling and laying off journalists, but I could be wrong.
I kinda did. You're obviously more interested in making "jokes" than reading the replies.
I do make a distinction between straight "news" sites and the more niche sites like the Economist, Wired, etc. I wasn't aware that NYT was now profitable via paywall - last I heard it was still struggling and laying off journalists, but I could be wrong.
[deleted]
Use a browser with a "stop loading" button and press it before overlay obscures the page. Esc works too. I guess it helps if your internet isn't blazing fast, it depends on the site and needs a bit of practice, but on this one it works just fine.
Incognito mode works most times.
Disable javascript.
Pay for a subscription.
Good luck getting unbiased non-clickbait news when journalists only source of revenue is directly tied to advertisment in an article.
Good luck getting unbiased non-clickbait news when journalists only source of revenue is directly tied to advertisment in an article.
I would be super interested in truly unbiased news and I am willing to pay quite a fortune for it -- through I am quite sure it wouldn't, philosophically, be possible to find.
Good luck getting unbiased news at any price.
Paywalls with workarounds are the only type of paywalls allowed on HN. Asking for a workaround is an acceptable practice.
https://hn.algolia.com/?query=paywalls%20by:dang&dateRange=a...
https://hn.algolia.com/?query=paywalls%20by:dang&dateRange=a...
Featuring one of dang's most nuanced arguments
> Yes, this sucks, but the loss of many substantive articles would suck worse.
Yes, me using open-source code without the author's permission, license, or attribution sucks, but the loss of the software I make with it would "suck worse." So I'm using your code for free, you put it on the internet anyway silly!
> Yes, this sucks, but the loss of many substantive articles would suck worse.
Yes, me using open-source code without the author's permission, license, or attribution sucks, but the loss of the software I make with it would "suck worse." So I'm using your code for free, you put it on the internet anyway silly!
Cool-doesn't mean it's right.
You realize Tyler Cowen posted three quarters of this piece on his website: https://marginalrevolution.com/marginalrevolution/2021/06/wh...
I will happily pay for quality content - Bloomberg is not one of those sources. You're defending a company that will happily use it's monopolistic edge to charge 24,000 a year for an API. Get off your high horse.
I will happily pay for quality content - Bloomberg is not one of those sources. You're defending a company that will happily use it's monopolistic edge to charge 24,000 a year for an API. Get off your high horse.
You're still increasing demand by reading the article, posting links to it, discussing it, upvoting the post, etc.
Don't consume and promote the content. You don't want to compromise the ethical stance you've taken against their monopoly do you?!
Don't consume and promote the content. You don't want to compromise the ethical stance you've taken against their monopoly do you?!
I recently switched to the Brave browser, and had no issues reading the article.
It would nevertheless be wonderful if HN readers could manage whitelists or blacklists related to paywalls, so by choice we could never see posts for content we can't read. Publishers shouldn't get the publicity for articles they won't share.
It would nevertheless be wonderful if HN readers could manage whitelists or blacklists related to paywalls, so by choice we could never see posts for content we can't read. Publishers shouldn't get the publicity for articles they won't share.
Given the somewhat clickbaity headline, this piece is straight to the point and surprisingly sober.
I found this to be the central thesis:
> If anything, crypto is more likely to hurt the currencies of countries that are doing very poorly, such as Venezuela. Fiat currency won’t just go away, so over the long run crypto could actually boost the value of the dollar by stifling the rise of potential competitors.
...and the author is absolutely correct: much of the crypto crowd, whether or not they understand this, seems wont to ignore it.
I view blockchain tech - and even crypto assets - as a wonderful, peaceful, transformative technology in the long-term. But I also think that the need for calm analysis, thinking about much, much longer timeframes, is sorely needed in the 'crypto crowd' today.
> A second point, oft neglected in the crypto community, is that crypto prices won’t continue to go up forever at high rates. It doesn’t matter whether money supply deflation is built into a crypto system, or that new and valuable uses will be discovered each year.
Here I again I agree, but I do want to add something important:
New and valuable uses are very important right now. I work at NuCypher, and we are very proud of having deployed proxy re-encryption as an access management tool. But nobody is using it, for two reasons: 1) gas prices, 2) there are no other "new and valuable uses" which make access management worthwhile at the moment.
Whether or not you see a rich future for blockchain tech, I hope we can all agree that solid uses - especially those which advantage groups marginalized by yesterday's internet - are the real driver of the eventual equilibrium the author describes here.
I found this to be the central thesis:
> If anything, crypto is more likely to hurt the currencies of countries that are doing very poorly, such as Venezuela. Fiat currency won’t just go away, so over the long run crypto could actually boost the value of the dollar by stifling the rise of potential competitors.
...and the author is absolutely correct: much of the crypto crowd, whether or not they understand this, seems wont to ignore it.
I view blockchain tech - and even crypto assets - as a wonderful, peaceful, transformative technology in the long-term. But I also think that the need for calm analysis, thinking about much, much longer timeframes, is sorely needed in the 'crypto crowd' today.
> A second point, oft neglected in the crypto community, is that crypto prices won’t continue to go up forever at high rates. It doesn’t matter whether money supply deflation is built into a crypto system, or that new and valuable uses will be discovered each year.
Here I again I agree, but I do want to add something important:
New and valuable uses are very important right now. I work at NuCypher, and we are very proud of having deployed proxy re-encryption as an access management tool. But nobody is using it, for two reasons: 1) gas prices, 2) there are no other "new and valuable uses" which make access management worthwhile at the moment.
Whether or not you see a rich future for blockchain tech, I hope we can all agree that solid uses - especially those which advantage groups marginalized by yesterday's internet - are the real driver of the eventual equilibrium the author describes here.
Anyone who thinks crypto prices will continue to rise forever is not 'the crypto crowd'. 'The crypto crowd' has seen bitcoin go up and down countless times.
The problem is, everyone seems to equate noobs getting suckered by Musk with the 'crypto crowd'. I feel bad for them, but it's like saying /r/wallstreetbets are 'investors'.
P.S. - And where do they keep getting this 'fiat is going away' bull from? I honestly don't know anyone in crypto that thinks this? Yes, I see crap on youtube pumping stuff like this - is that now what the bar is? "I saw it on youtube" ?
The problem is, everyone seems to equate noobs getting suckered by Musk with the 'crypto crowd'. I feel bad for them, but it's like saying /r/wallstreetbets are 'investors'.
P.S. - And where do they keep getting this 'fiat is going away' bull from? I honestly don't know anyone in crypto that thinks this? Yes, I see crap on youtube pumping stuff like this - is that now what the bar is? "I saw it on youtube" ?
> P.S. - And where do they keep getting this 'fiat is going away' bull from? I honestly don't know anyone in crypto that thinks this? Yes, I see crap on youtube pumping stuff like this - is that now what the bar is? "I saw it on youtube" ?
I've seen several comments here on Hacker News that has this WTF-level of cryptoboosterism. Certainly anyone who seriously argues "but you forgot to account for the energy cost of nuclear carriers in propping up fiat currency" gives off the same vibes as "fiat is going to crash once we realize it's all funny money."
I've seen several comments here on Hacker News that has this WTF-level of cryptoboosterism. Certainly anyone who seriously argues "but you forgot to account for the energy cost of nuclear carriers in propping up fiat currency" gives off the same vibes as "fiat is going to crash once we realize it's all funny money."
>>Certainly anyone who seriously argues "but you forgot to account for the energy cost of nuclear carriers in propping up fiat currency"
I honestly don't think I've seen anything like that here - but once the crypto threads get too long I stop reading cuz all the cranks come out.
But even if we stipulate that as true, is it fair to paint the whole crypto community with that brush? I see cranks in everything from cancer treatment to prepping to stock investing. Everyone seems to realize those fringes don't represent the majority views..So why is it when its crypto, the fringes suddenly represent the majority? It's a bit annoying, like we're all out there mortgaging our houses on this stuff...
I honestly don't think I've seen anything like that here - but once the crypto threads get too long I stop reading cuz all the cranks come out.
But even if we stipulate that as true, is it fair to paint the whole crypto community with that brush? I see cranks in everything from cancer treatment to prepping to stock investing. Everyone seems to realize those fringes don't represent the majority views..So why is it when its crypto, the fringes suddenly represent the majority? It's a bit annoying, like we're all out there mortgaging our houses on this stuff...
Just one cite I can give recently:
https://news.ycombinator.com/item?id=27179397
> I find it frustrating that crypto-currencies are judged by their energy usage, meanwhile traditional fiat currencies are secured by massive banking industries, governments, and militaries. The total energy required to maintain a secure and stable fiat currency is likely orders of magnitude greater than that of Bitcoin today.
I originally had the quote as a strawman rendition (an exaggeration of the but-you-forgot-to-account-for-X arguments) of the enthusiasts trying to explain away Bitcoin's rapacious energy consumption, and like a week later, I actually saw someone try to specifically cite the energy cost of carriers.
Since then, virtually every thread on Bitcoin's energy consumption has had some people come out of the woodwork with that kind of defense, and I don't really have the mood to do the searching to establish just how common those views are.
https://news.ycombinator.com/item?id=27179397
> I find it frustrating that crypto-currencies are judged by their energy usage, meanwhile traditional fiat currencies are secured by massive banking industries, governments, and militaries. The total energy required to maintain a secure and stable fiat currency is likely orders of magnitude greater than that of Bitcoin today.
I originally had the quote as a strawman rendition (an exaggeration of the but-you-forgot-to-account-for-X arguments) of the enthusiasts trying to explain away Bitcoin's rapacious energy consumption, and like a week later, I actually saw someone try to specifically cite the energy cost of carriers.
Since then, virtually every thread on Bitcoin's energy consumption has had some people come out of the woodwork with that kind of defense, and I don't really have the mood to do the searching to establish just how common those views are.
Fair enough...
But the other side of the coin is miners trying to reduce the energy consumption and use green sources. Again, everyone just wants to point at a vocal minority and call it good.
edit: I should probably point out the trend to move away from PoW to 'Staking' (PoS) solutions that are more energy efficient. The crypto community isn't ignoring energy usage issues.
But the other side of the coin is miners trying to reduce the energy consumption and use green sources. Again, everyone just wants to point at a vocal minority and call it good.
edit: I should probably point out the trend to move away from PoW to 'Staking' (PoS) solutions that are more energy efficient. The crypto community isn't ignoring energy usage issues.
I think the former is a perfectly reasonable consideration, while the latter is short-shrift.
Am I wrong?
Am I wrong?
sorry - I lost track of the former and the latter... Guess I need more coffee :-) What are they referring to?
I think that the consequences of imperialism and warfare are reasonable understood as part of the ecological toll of the dollar for the purposes of comparisons to the carbon costs of PoW mining. (that's the former)
...while I don't think that fiat currency will suddenly crash based on a eureka moment regarding the monetary policies by which the dollar is minted and lent (the latter).
...while I don't think that fiat currency will suddenly crash based on a eureka moment regarding the monetary policies by which the dollar is minted and lent (the latter).
This is about cryptocurrency, NOT crypto. The article name, at least, should have "sic" to indicate that it's a copy of something which is incorrect.
You are fighting a war for good cause, but this war has already been lost. Crypto means crypto currencies at this point, whether you want it or not.
For what it is worth “[sic]” does not mean that something is incorrect, just indicates it is a direct copy of another source. Could be an error or typo, could just be idiosyncratic, archaic, or potentially confusing.
In your case it would not be appropriate, because like it or not the quote usage has become normal usage. I understand why that annoys people, but it’s done.
In your case it would not be appropriate, because like it or not the quote usage has become normal usage. I understand why that annoys people, but it’s done.
It's standard usage at this point, adding a [sic] would not be correct. You should climb down from this hill.
[deleted](1)
Times (and words) are changing
It is sad that the biggest influencers in crypto are like Pomp + Ran Neuner who constantly say shit like the "dollar is collapsing."
You go be pro cryptocurrency and still hate cryptocurrency
You go be pro cryptocurrency and still hate cryptocurrency
The fact that having a deflationary money supply is bad, is even debated in cryptocurrency forums is the clearest indication that they have no idea how economics works.
...also, the point of a currency is to act as a STABLE unit of exchange, not some speculative moon-shot.
Once these money supply and stability issues are ironed out, and once the scalability problem is solved, I think we might really have something.
...also, the point of a currency is to act as a STABLE unit of exchange, not some speculative moon-shot.
Once these money supply and stability issues are ironed out, and once the scalability problem is solved, I think we might really have something.
> the point of a currency is to act as a STABLE unit of exchange
Very few informed observers seriously expect crypto to become a general-use currency. That's a role it detached from years ago, first in practice and then in rhetoric.
The closest analog to what crypto seems to want to become in our financial markets is in risk-free assets. Universal collateral. This used to be gold. Now it's Treasuries and Bunds. None of those markets are terrifically efficient or universalized. And neither requires long-term price stability; just predictability.
(Note: it does not follow that crypto will be as valuable as e.g. the Treasury market. Treasuries serve as a safe asset. They also finance the U.S. government. Figuring out the worth of the former detached from the latter is difficult.)
Very few informed observers seriously expect crypto to become a general-use currency. That's a role it detached from years ago, first in practice and then in rhetoric.
The closest analog to what crypto seems to want to become in our financial markets is in risk-free assets. Universal collateral. This used to be gold. Now it's Treasuries and Bunds. None of those markets are terrifically efficient or universalized. And neither requires long-term price stability; just predictability.
(Note: it does not follow that crypto will be as valuable as e.g. the Treasury market. Treasuries serve as a safe asset. They also finance the U.S. government. Figuring out the worth of the former detached from the latter is difficult.)
The closest analog to what crypto seems to want to become in our financial markets is cash hidden in a briefcase. The value is primarily in evading currency controls for smuggling wealth out of China and other authoritarian states.
It may not be what informed observers want it to be, but it's still what every single person I've seen trumpeting the virtues of cryptocurrency here on HN has been shooting for.
The argument is invariably "the value of cryptocurrency is giving us a currency that's not controlled by central banks". Never have I seen someone saying cryptocurrency should be used because it's highly volatile and great for speculating.
So there seems to be a significant divide between the people who use cryptocurrency (but don't attach a moral value to it) and the people who believe in cryptocurrency (but ignore what it's actually used for).
The argument is invariably "the value of cryptocurrency is giving us a currency that's not controlled by central banks". Never have I seen someone saying cryptocurrency should be used because it's highly volatile and great for speculating.
So there seems to be a significant divide between the people who use cryptocurrency (but don't attach a moral value to it) and the people who believe in cryptocurrency (but ignore what it's actually used for).
If we forget all the "wants" various parties might have today, I think we can all agree that IF the scalability issue can be ironed out, then there is extremely significant value in cryptocurrencies acting as a real world currency.
It's very easy for people today to forget the 1800s that had significant periods of deflation and thus one of the reasons the federal reserve was created... although they allowed deflation to happen during the great depression as well. There is certainly some debate that can be had about the way to easy money policies that exist today (and I do think it's far too dovish), but people need to learn their history and realize the damage that deflation does.
Well, they do not really want a stable unit. From the very founders all the way down, everyone wants a limited supply, deflationary and as much as possible of it in their own wallet.
And they want to cash out in the inflationary fiat currencies.
> The fact that having a deflationary money supply is bad.
Your "fact" encodes a lot of presumptions. Bad for whom?
Moreover, post-civil-war US (deflationary) is a good counterexample, not entirely clear that that era was "bad", hell, a good chunk of the population was emancipated from slavery amidst deflation.
Your "fact" encodes a lot of presumptions. Bad for whom?
Moreover, post-civil-war US (deflationary) is a good counterexample, not entirely clear that that era was "bad", hell, a good chunk of the population was emancipated from slavery amidst deflation.
Bitcoin is not inherently deflationary.
And the inflationary consensus in mainstream economics is not one born out of reason, evidence or good faith. The truth is, inflationary monetary policy is mainstream because of political reasons, not economic ones.
And the inflationary consensus in mainstream economics is not one born out of reason, evidence or good faith. The truth is, inflationary monetary policy is mainstream because of political reasons, not economic ones.
The inflationary consensus is a practical issue and common sense.
If an asset is deflationary, I have an incentive to hold onto it as long as possible. Spending it is costly.
If an asset is inflationary, it's costly to hold it.
If everyone receives an inflationary asset by default for goods/services and everyone wants to trade it for something else, we have an extremely liquid asset that can be exchanged for other things -- currency.
If an asset is deflationary, I have an incentive to hold onto it as long as possible. Spending it is costly.
If an asset is inflationary, it's costly to hold it.
If everyone receives an inflationary asset by default for goods/services and everyone wants to trade it for something else, we have an extremely liquid asset that can be exchanged for other things -- currency.
It is, after all bitcoins are eventually mined, because some private keys get irretrievably lost and those coins can therefore never be recovered.
2 things:
- bitcoin tends towards 21 million mined bitcoin, but just like mathematical limits that means that it will continue mining some bitcoin essentially forever (progressively smaller and smaller amounts).
- people forgetting or losing their keys doesn't make bitcoin deflationary anymore than it makes the USD deflationary. Furthermore that is not something inherent to bitcoin, but simply a practical result.
- bitcoin tends towards 21 million mined bitcoin, but just like mathematical limits that means that it will continue mining some bitcoin essentially forever (progressively smaller and smaller amounts).
- people forgetting or losing their keys doesn't make bitcoin deflationary anymore than it makes the USD deflationary. Furthermore that is not something inherent to bitcoin, but simply a practical result.
I still don't see how you get to a cryptocurrency that's broadly useful as a currency without enough price stability for it to be a unit of account in some sense. Tesla may have accepted BTC for payment, and it might do so again, but is it really going to commit to pricing its next model at (say) 1 BTC and just let the dollar-denominated price swing wildly? Probably not - its competitors price in dollars, so if BTC goes up it would become less attractive, and its suppliers price in dollars and other fiat currencies, so if BTC goes down its marginal revenue could fall below its marginal cost.
On top of that, BTC-denominated debt is potentially toxic for the holder. Imagine if you bought a house for, say, 1000 BTC in 2016 and your mortgage was denominated in BTC. Gradual devaluation of debt is one reason that central bank inflation targets in developed countries tend to be small positive numbers. Monetary policy is hard, and despite (totally valid) criticisms of central banks' monetary policy decisions in recent years, I'm still skeptical that anyone can do it purely algorithmically and have better results than the Fed.
I still think Libra was the only token (besides explicitly fiat-denominated stablecoins) I've seen that had a real shot at being broadly used as a currency, though I'm glad that FB won't be the ones to "own" a global currency. The "problem" is that any token that's stable enough to use as a currency is inherently too stable to have potential for large speculative gains (except if you lever it to the hilt as FX traders do today) - and IMO demand in the crypto space is still predominantly driven by speculative potential.
On top of that, BTC-denominated debt is potentially toxic for the holder. Imagine if you bought a house for, say, 1000 BTC in 2016 and your mortgage was denominated in BTC. Gradual devaluation of debt is one reason that central bank inflation targets in developed countries tend to be small positive numbers. Monetary policy is hard, and despite (totally valid) criticisms of central banks' monetary policy decisions in recent years, I'm still skeptical that anyone can do it purely algorithmically and have better results than the Fed.
I still think Libra was the only token (besides explicitly fiat-denominated stablecoins) I've seen that had a real shot at being broadly used as a currency, though I'm glad that FB won't be the ones to "own" a global currency. The "problem" is that any token that's stable enough to use as a currency is inherently too stable to have potential for large speculative gains (except if you lever it to the hilt as FX traders do today) - and IMO demand in the crypto space is still predominantly driven by speculative potential.
I would think that early adaptors would look to take X% of their profits through crypto. If they can afford to continue operating even if they lose X, then it is an attractive opportunity, given the fact that it can rise in value so much (likely to be partly driven by their adoption if they are big and important enough). Eventually, a coin will inevitably become the default, and balance out. So, I personally don't see the instability factor as an issue right now.
Doing a stablecoin to replace something like the USD is an extremely difficult problem. Reserve.org is one company which understands the gravity of the issue and is committed to producing a stablecoin for anyone, worthy enough to replace the USD.
> a stablecoin to replace something like the USD is an extremely difficult problem
It's also a solved one.
There is one party on the planet that can credibly solve this problem, and it's the Fed. Walter Bagehot wrote about this effectively in 1873 [1], it's still comprehensible, and it is to the Federal Reserve Act what the Declaration is to the Constitution.
Every U.S. dollar stablecoin issued by someone who is not (a) the Fed and (b) fully reserved is trying to solve the impossible trinity [2].
[1] https://en.wikipedia.org/wiki/Lombard_Street:_A_Description_...
[2] https://en.wikipedia.org/wiki/Impossible_trinity
It's also a solved one.
There is one party on the planet that can credibly solve this problem, and it's the Fed. Walter Bagehot wrote about this effectively in 1873 [1], it's still comprehensible, and it is to the Federal Reserve Act what the Declaration is to the Constitution.
Every U.S. dollar stablecoin issued by someone who is not (a) the Fed and (b) fully reserved is trying to solve the impossible trinity [2].
[1] https://en.wikipedia.org/wiki/Lombard_Street:_A_Description_...
[2] https://en.wikipedia.org/wiki/Impossible_trinity
Could you elaborate about how does the impossible trinity follows from (a) and (b)?
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At a glance it looks like that's materially the same mechanism that was used by IRON [0], which blew up last week after they had to mint too many of the stabilizing tokens to try to retain the USD peg. Am I missing something?
[0] https://docs.iron.finance
[0] https://docs.iron.finance
lol here comes the FUD
Both things are well understood by the bitcoin community, at least. Bitcoin's utility doesn't depend solely on inflation or replacing the dollar as the global reserve currency, though that's a popular topic, since the collapse of the dollar would prove Bitcoin's place. For the second point, HODLing seems like it's forever, but it's only for the next decade or two; the expected growth comes from getting in early - just like if you bought an Warhol painting while he was still active.
So I agree, but the author of the article is using these arguments to strawman the crypto community, which is full of really smart people as well as idiots.
So I agree, but the author of the article is using these arguments to strawman the crypto community, which is full of really smart people as well as idiots.
One thing I like about crypto is you can simulate economics experiments with funny money online. Ponzi Scheme? There are plenty of these going on. Want to investigate Harberger's triangle/deadweight tax loss? Create a small game. Prediction markets? See auger.
As long as you approach it from the perspective of 'this money is probably worthless' it's all just a fun learning experience about economic theory.
The only problem is some people "invest" more than they are comfortable losing. And that causes some tragedy.
As long as you approach it from the perspective of 'this money is probably worthless' it's all just a fun learning experience about economic theory.
The only problem is some people "invest" more than they are comfortable losing. And that causes some tragedy.
I'm an author cited by the original bitcoin paper. I considered becoming an economist rather than a mathematician.
Cryptocurrencies are a carbon-load environmental crime. Figuring a way around this is the major unsolved problem in the field. Are you a vegetarian in the crypto-crowd? You'd be doing the planet a favor to start eating meat and abandoning cryptocurrencies.
National currencies used to be backed by gold; now they're backed by the nation's resolve to support the currency. Cryptocurrencies are not Ponzi schemes; they can stabilize, while Ponzi schemes collapse. Cryptocurrencies however are backed entirely by convention. One could argue that nations are conventions, but they are bound together by a constellation of motives beyond their currency. Cryptocurrencies are isolated conventions. That is their appeal and their vulnerability.
We are a cripplingly conventional species. Our ability to organize allowed us to scale past the Neanderthals. However, many of us don't trust convention enough to trust cryptocurrencies.
Cryptocurrencies are a carbon-load environmental crime. Figuring a way around this is the major unsolved problem in the field. Are you a vegetarian in the crypto-crowd? You'd be doing the planet a favor to start eating meat and abandoning cryptocurrencies.
National currencies used to be backed by gold; now they're backed by the nation's resolve to support the currency. Cryptocurrencies are not Ponzi schemes; they can stabilize, while Ponzi schemes collapse. Cryptocurrencies however are backed entirely by convention. One could argue that nations are conventions, but they are bound together by a constellation of motives beyond their currency. Cryptocurrencies are isolated conventions. That is their appeal and their vulnerability.
We are a cripplingly conventional species. Our ability to organize allowed us to scale past the Neanderthals. However, many of us don't trust convention enough to trust cryptocurrencies.
> National currencies used to be backed by gold; now they're backed by the nation's resolve to support the currency. Cryptocurrencies are not Ponzi schemes; they can stabilize, while Ponzi schemes collapse. Cryptocurrencies however are backed entirely by convention. One could argue that nations are conventions, but they are bound together by a constellation of motives beyond their currency. Cryptocurrencies are isolated conventions. That is their appeal and their vulnerability.
That is why I object to the way it is common in cryptocurrency circles to refer to national currencies as "fiat".
Before cryptocurrency, there was essentially a dichotomy:
(1) Money that either is a commodity (e.g., gold, diamonds) or is backed by a commodity. This kind of money has intrinsic value aside from its use as money--in a post-apocalyptic collapsed civilization for instance you can still use your gold bars to smash in the skulls of people trying to steal your stash of food.
(2) Money that is backed by agreement that it is money, and that has almost no intrinsic value. Generally this only worked on a large scale if someone big, like the government, agrees that it is money and encouraged others to do so such as by making this the only form of money acceptable for paying debts owed to the government (such as taxes) or for the government to use to pay debts.
Until this century it wasn't really practical to have a large scale type #2 money for general use without it being backed by a government and so the term "fiat money" came to mean the whole of type #2.
Bitcoin and similar cryptocurrencies are type #2 but not government backed. By using the term "fiat" to refer to other type #2 money, it gives the impression that Bitcoin is not type #2. This can lead people into thinking Bitcoin is type #1. I've seen people invest in Bitcoin thinking that they are investing in a gold-like money because of this.
The dichotomy needs to become a trichotomy: (1) commodity money, (2) government-backed fiat money, (3) non-government-backed fiat money.
That is why I object to the way it is common in cryptocurrency circles to refer to national currencies as "fiat".
Before cryptocurrency, there was essentially a dichotomy:
(1) Money that either is a commodity (e.g., gold, diamonds) or is backed by a commodity. This kind of money has intrinsic value aside from its use as money--in a post-apocalyptic collapsed civilization for instance you can still use your gold bars to smash in the skulls of people trying to steal your stash of food.
(2) Money that is backed by agreement that it is money, and that has almost no intrinsic value. Generally this only worked on a large scale if someone big, like the government, agrees that it is money and encouraged others to do so such as by making this the only form of money acceptable for paying debts owed to the government (such as taxes) or for the government to use to pay debts.
Until this century it wasn't really practical to have a large scale type #2 money for general use without it being backed by a government and so the term "fiat money" came to mean the whole of type #2.
Bitcoin and similar cryptocurrencies are type #2 but not government backed. By using the term "fiat" to refer to other type #2 money, it gives the impression that Bitcoin is not type #2. This can lead people into thinking Bitcoin is type #1. I've seen people invest in Bitcoin thinking that they are investing in a gold-like money because of this.
The dichotomy needs to become a trichotomy: (1) commodity money, (2) government-backed fiat money, (3) non-government-backed fiat money.
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Please don't take HN threads into ideological flamewar. It makes discussions more predictable and nastier, and we're trying for the opposites here.
If you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html and taking the intended spirit of the site more to heart, we'd be grateful. Note these ones:
"Please don't use Hacker News for political or ideological battle. It tramples curiosity."
"Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith."
If you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html and taking the intended spirit of the site more to heart, we'd be grateful. Note these ones:
"Please don't use Hacker News for political or ideological battle. It tramples curiosity."
"Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith."
Not sure how it’s different. In both cases, the people who make the currency and their friends get rich, and the average Joe gets nothing.
> A second point, oft neglected in the crypto community, is that crypto prices won’t continue to go up forever at high rates.
The True Believers expect and want this to happen. It has to level out to be a currency. Cryptocurrency is useless as a currency with the current volatility as a result of ignorant and rank speculation.
The True Believers expect and want this to happen. It has to level out to be a currency. Cryptocurrency is useless as a currency with the current volatility as a result of ignorant and rank speculation.
At some point X-COIN will reach a maximum price, $MAX. Why would anyone buy X-COIN at $MAX? By definition it will lose you money. You can repeat this argument with any amount, because ultimately you're just going to subject someone else to the same situation.
Regress this to its logical extreme and you see there's no point of buying it at all, unless crypto itself has some meaningful value beyond its converted price to fiat. That itself has yet to be proven.