Slashdot Mirror
'Cryptocurrencies Are Like Lottery Tickets That Might Pay Off in Future' (theguardian.com)
With the price of bitcoin down 80% from its peak a year ago, and the larger cryptocurrency market in systemic collapse, has "peak crypto" come and gone? From a column: Perhaps, but don't expect to see true believers lining up to have their cryptocurrency tattoos removed just yet. At a recent conference I attended, the overwhelming sentiment was that market capitalisation of cryptocurrencies could explode over the next five years, rising to $5-10tn. For those who watched the price of bitcoin go from $13 in December 2012 to roughly $4,000 today, this year's drop from $20,000 was no reason to panic.
It is tempting to say, "Of course the price is collapsing." Regulators are gradually waking up to the fact that they cannot countenance large expensive-to-trace transaction technologies that facilitate tax evasion and criminal activity. At the same time, central banks from Sweden to China are realising that they, too, can issue digital currencies. As I emphasised in my 2016 book on the past, present, and future of currency, when it comes to new forms of money, the private sector may innovate, but in due time the government regulates and appropriates.
But as I also pointed out back then, just because the long-term value of bitcoin is more likely to be $100 than $100,000 does not necessarily mean that it definitely should be worth zero. The right way to think about cryptocurrency coins is as lottery tickets that pay off in a dystopian future where they are used in rogue and failed states, or perhaps in countries where citizens have already lost all semblance of privacy. It is no coincidence that dysfunctional Venezuela is the first issuer of a state-backed cryptocurrency (the "petro").
It is tempting to say, "Of course the price is collapsing." Regulators are gradually waking up to the fact that they cannot countenance large expensive-to-trace transaction technologies that facilitate tax evasion and criminal activity. At the same time, central banks from Sweden to China are realising that they, too, can issue digital currencies. As I emphasised in my 2016 book on the past, present, and future of currency, when it comes to new forms of money, the private sector may innovate, but in due time the government regulates and appropriates.
But as I also pointed out back then, just because the long-term value of bitcoin is more likely to be $100 than $100,000 does not necessarily mean that it definitely should be worth zero. The right way to think about cryptocurrency coins is as lottery tickets that pay off in a dystopian future where they are used in rogue and failed states, or perhaps in countries where citizens have already lost all semblance of privacy. It is no coincidence that dysfunctional Venezuela is the first issuer of a state-backed cryptocurrency (the "petro").
Is stupid.
Checkmate.
I'm old enough to remember when cryptocurrencies were going to replace fiat currency.
Now, they're lottery tickets. Do the coinbros know that almost everyone loses money on lottery tickets?
You are welcome on my lawn.
The premise here is that people will suddenly see the value of cryptocurrency, and not some better cryptocurrency that they create then, but the old cryptocurrency. The problem with this is that the naive folks who bought cryptocurrency on its run up, mortgaging their homes and running up their credit cards, aren't going to be in the market that way a second time.
It's over. It only goes down from here. It never had any intrinsic value, and the folks who were in denial about that have had to face it now.
Bruce Perens.
Cryptocurrencies are like tulips! Cryptocurrencies are like lottery tickets!.....wow, I'm on a roll here!......Cryptocurrencies are like washing machines! Cryptocurrencies are like terrorists!
Just like that Power Ball ticket I bought hoping to get the billion dollar jackpot "paid off" a few weeks ago.
I also have a few zero volume penny stocks back from gambling... Err day trading penny stocks.
I keep them around as a reminder of what results from hubris and greed.
Most of these cyryptocurrencies will end up the same: no bid.
Don't be a bag hodler.
The $100k/BTC thesis - in my mind - was always supported by the idea that BTC would be used in the third world. Just talk to any Venmo user about installing a Bitcoin wallet to see that it's mostly a non-starter as a currency in the developed world. But the opportunities in Latin America and Africa (at least where Internet penetrates) are huge.
Fiat currencies are the true lottery ticket: A wealth transfer: from the fiat currency user to the state. We already know the winner. Since the 20th century, only fiat currencies are available as money; Keynes mindset, and inflation, did a great job to suppress the 'store of value' effect of any money. Now, we need a trustless, trans-border, anti-censorship resistant, and so enforcing the private property rights of the owners, new form of hard money. This is Bitcoin: A protocol; And as a money; Bitcoin is harder than Gold. Only Bitcoin matter.
Aren't lottery tickets *already* lottery tickets that might pay off in the future? Feels like I have better odds with them too, but maybe the dozens/hundreds of failed coins out there have made me a smidge cynical.
So, a lotery ticket that may or may not pay in the future? Perhaps the same could be said of stock shares and Wall Street. And nobody worried for the last black thurdsday, 90 years ago!
No the problem is that the value of your CURRENT cryptocurrency is just going downhill and will be worth nothing in the long run. This will happen for all cryptocurrencies and the reason is that people just create new and new cryptocurrency.
The only people that can cash in are the people that originally created the cryptocurrency and they cash in before it becomes worthless. So everyone is trying to create their own cryptocurrency to cash in. Rinse repeat. An endless cycle that will never stop and makes common cryptocurrency useless.
The only way that a cryptocurrency can work, is if it is backed up by a government state so that you are quaranted to have an actual value for the currency based on the trust for the government. We have a name for this it's just called "Currency".
Lottery usually has (a) certain guaranteed odds of winning, crypto has no guarantees. (b) Lotteries are usually licensed with a limited number of licenses at any time. There is literally no limit on the number of possible cryptocurrencies.
The value of major cryptos is unlikely to go to hard zero though. There is utility in BTC and friends which is circumvention of regulations. Someone will always want to launder money and sell drugs.
But it's very unlikely for a legit application of blockchain to exist at all because a distributed transaction with consensus is fundamentally more expensive than a centralized one with a trusted third party. All, and I mean absolutely all with no exceptions, all current companies/products in "legit" space are doing things with blockchain purely for marketing/FMO reasons. All of these apps can be done more efficiently without the blockchain.
I heard somewhere that the chances of you buying a winning ticket in the NY lottery are the same as you finding that a winning ticket in the gutter. I can't imagine the stats are much different in other parts of the world.
At least I don't have to listen to people in the local pub telling me how they are going to make millions on the BTC they bought at the top of the market anymore, now it is only the desperados trying to talk the market up.
There. Done.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
What's the next step?
The right way to think about cryptocurrency coins is as lottery tickets that pay off in a dystopian future where they are used in rogue and failed states, or perhaps in countries where citizens have already lost all semblance of privacy. It is no coincidence that dysfunctional Venezuela is the first issuer of a state-backed cryptocurrency (the "petro").
They are really using Venezuela as an example? Maduro's government created the petro because he's blown all of their foreign currency reserves. It's supposedly backed 1:1 by a barrel of oil, from a specific region in Venezuela officially. Of course, investigations by reporters have found no investment in or increase of oil production facilities in that area. Oh, and the government, which pre-mined all the coins, hasn't released any yet. And the only hard currency the government accepts to purchase petros is the ruble (all the other options are other crypto coins). The whole petro thing was basically a way to get money from Russia while avoiding US sanctions. Oh, and fun fact, Russia has now started flying nuclear-capable Tu-160 bombers into Venezuela. Hmm, couldn't be because the Venezuelan government struck a deal with Russia for power projection in exchange for cash, could it?
The only thing necessary for evil to triumph is for it to be pitted against a slightly greater evil
It's just a bad analogy.
If you reply, do so only to what I explicitly wrote. If I didn't write it, don't assume or infer it.
"The right way to think about cryptocurrency coins is as lottery tickets that pay off in a dystopian future where they are used in rogue and failed states, or perhaps in countries where citizens have already lost all semblance of privacy"
A dystopia future... where the government and major institutions have fallen... but the internet still works just fine enough to run a whole shadow economy.
That's so comically ridiculous. In such a situation of a failed state -of which we have several contemporary real-world examples to point to- the internet isn't reliable enough to operate the whole economy.
Rather, in such a situation, people resort back to the original form of currency, (No, not bartering. Sorry to burst your bubble) interpersonal debt. Interpersonal debt is the most efficient form of currency in a local market, and it's the economic system that was by far the most common in the world prior to the printing press and colonization (global colonization made debt management difficult, so the governments and corporations had to use a less efficient, on a local scale, system of managing payment for goods -ie, monetary payment.) We sure as hell ain't going to suddenly buy up magic internet money, when access to the internet will potentially be unreliable. That would make the whole economic system unreliable, and people will still need milk and eggs.
I bet 100 trillion dollars ZWB that that can happen with anything that isn't backed by some actual good.
Liquidity + Scarcity = Value. Whether it's shells on a beach or stone wheels or photographically signed tokens, it doesn't matter.
Which one(s) remains to be seen but I'm betting that the winner(s) are already out.
Both of these statements can't be true. Cryptocurrency advocates claim artificial scarcity because of the mining which is kindof true. The problem is that the currencies themselves are not scarce. It's free to create your own currency and you only need a minimal amount of liquidity and they all become equivalent.
You can't pick a winner because there likely won't be a single winner. Any and all currencies that reach minimal viability will likely all hover around the same dollar amount. My guess is that we will eventually have several hundred currencies and they all will be worth something in the double digits.
When cryptocurrency was opened to the stock market it became doomed to failure. Before that, the "value" was rising because it was useful. Its only intrinsic value is that value it presents for exchanging goods and services. For people who actually "use" cryptocurrencies, it's value needs to be kept stable, or everyone would refuse to use it, and thus it would have zero value
Enter the stock market, and now the market traders all want to make money by trading the currency itself, a thing with no intrinsic value except for what it can do. If the people who use it all cashed out then the stock market price would be $0. The way the stock market "makes money" (actually move money from one account to another) is to second guess what the other traders will think its value will be tomorrow. Buy low, sell high of course. The stock market will not "make money" unless the price/value is volatile. If the price was consistent over time the traders would have zero interest in it, because they can't trick the other traders into valuing it more tomorrow than today, because the price would be stable. In order to make money in trading cryptocurrency, it is in the traders best interest to force the price to become volatile and then to correctly guess tomorrows value. They will try every trick in the book to force wide swings in the "market value", even emplying illegal tricks if they can find a way to make that happen.
See the problem yet? The traders WANT the price to vary, and the users of it DEMAND the price to be stable! The traders will do everything in their power to make the value fluctuate, while the people trying to use it will be moving their share to some other currancy which is more stable, thus forcing the value to further decline. This is a feedback loop biased towards zero value.
When a stock for a traded company does poorly you can sell off its assets and regain some of that original value. When a cryptocurrency tanks it becomes worthless, and nothing can be sold off or recouped from the electronic dust that remains. Its value then is merely nostalga. It has no value beyond what other people think it will be worth tomorrow. If everyone thinks it has zero value, because nobody can trust that value being stable tomorrow, then the cryptocurrency is 100%, without any doubt, completely worthless. At that point you can thank the stock market for making your cryptocurrency wallet worthless.
If you are going to invest in any cryptocurrency my advise is to pick one that states up front that it will never be openly traded on the stock market. That one may have a chance at actually being stable, and you can count on its only intrinsic value, trust in its worth tomorrow being the same as today.