
Founders Fund Makes Bet on Bitcoin - bko
https://www.wsj.com/articles/peter-thiels-founders-fund-makes-big-bet-on-bitcoin-1514917433
======
shepardrtc
I'm bullish on crypto, but there are many better ones out there other than
bitcoin. The scaling and transaction cost issues that have been on display for
the past couple of months should scare anyone heavily invested in it. Without
serious usage, what good is it?

~~~
sillysaurus3
Ok, what's going on here is that people have this expectation of Bitcoin not
based in reality.

Bitcoin was not designed to be a high-throughput currency. It's a store of
value.

You put your money in it and let it sit. That's it.

If you don't want to do that, don't use it. But that's what it's for. Or at
least what it's evolved into.

I think it can cause a gigantic speculative bubble that will put people like
Thiel in control over even more wealth in the world than they already have –
if BTC goes to $1M/coin, what do you think will happen? $10M? There's no upper
limit.

But that's a separate issue.

Bitcoin doesn't have to do anything except what it was designed to do. And it
was designed this way. Satoshi certainly thought through this scenario and
specifically decided to do this, and not something else. So those who are
putting money into BTC are betting on Satoshi's original vision.

Now, do you think Satoshi really believed BTC would be the only crypto? I
think he knew others would spring up. He solved the byzantine generals problem
with sybil resistance. Of course he knew others could solve it too, in
slightly different ways.

So I think he just said "Well, let them do that." And hence, use different
cryptos for different circumstances.

~~~
phpnode
Where does this "bitcoin is a store of value, not a medium for exchange"
nonsense come from? Literally the first line of the white paper:

> A purely peer-to-peer version of electronic cash would allow online payments
> to be sent directly from one party to another without going through a
> financial institution.

~~~
sillysaurus3
And it is. When you pay Coinbase, they send you BTC. Then you're free to send
your BTC around if you decide the $20 transaction fee is worth it.

~~~
annabellish
In that scenario you're not using bitcoin, you're asking a centralised,
trusted third party to adjust a couple figures in a database.

If I wanted to do that, I would ask my bank to do it, because they're better
at it.

~~~
oreo81
Which is fine until they decide to freeze your assets.

~~~
annabellish
Yeah, that is the problem with relying on Coinbase. You have essentially no
recourse when they freeze your assets, which happens a _lot_ more often than
the banking system, with its consumer protections and actual regulations.

~~~
oreo81
That's why you don't store assets on coinbase...the whole point of crypto is
that it allows you to be in exclusive control of your assets. Why is that so
hard to understand?

~~~
annabellish
The response when somebody tries to do transactions on-chain:

> And it is. When you pay Coinbase, they send you BTC. Then you're free to
> send your BTC around if you decide the $20 transaction fee is worth it.

The response when somebody tries to do transactions off-chain:

> That's why you don't store assets on coinbase...the whole point of crypto is
> that it allows you to be in exclusive control of your assets. Why is that so
> hard to understand?

The important thing is to make sure that no matter what anybody does, they're
wrong, and that way bitcoin cannot possibly have any flaws.

------
chollida1
I really wish I knew how he is hedging his bets on this.

One of the first rules you learn in managing other peoples money is always
hedge the downside. Or put another way, you need asymmetric upside/downside
risk inorder to make any investment.

One of the biggest risks to bitcoin is the old saying that in down markets all
products have a correlation of 1. Meaning when panic sets in, leveraged firms,
which is almost all hedge funds, have to deleverage.

Unfortunately, in a large crash this means that everything gets sold pushing
down prices more and causing another round of selling.

If the US cash equities markets does have a large crash this year, bitcoin is
in the cross hairs as one asset that could have a selling spree that retail
money has no hope of supporting.

 __EDIT __

Ah this is his venture capital fund, so I guess the LP 's are used to not
being able to hedge and hence the naked speculation is appropriate....

~~~
kolbe
Founders Fund: $3,000,000,000

Invested capital at risk: $20,000,000 (the 'hundreds of millions' is based on
how much that investment has appreciated)

I think a more appropriate "first rule" would be don't freak out and over-
analyze a risk that represents 1% of your portfolio.

~~~
komali2
Jesus, that is some money right there.

Always boggles my mind when something in the value of billions is compared to
millions.

20 million is .6% of 3 billion. The math is simple and straightforward but the
real world metaphor as applied to cash actually blows my mind.

~~~
realusername
People generally have a hard time to understand the dimension between
billionaires and millionaires, they are not in the same category at all.

~~~
pbw
I agree by numerical value the difference is huge and under appreciated. But
like many things wealth is correctly perceived logarithmically not linearly.
There aren't hundreds of shades of gray between a millionaire and a
billionaire, there are few steps, I wrote about them here
[http://www.kmeme.com/2017/11/the-richer-
scale.html](http://www.kmeme.com/2017/11/the-richer-scale.html).

~~~
oreo81
Is that a joke?

------
sjg007
Surprised it took so long. The original thesis for PayPal was as a digital
currency not controlled by a single entity but as we know, the final
implementation was short of that. In that original pursuit Bitcoin ticks a lot
of the libertarian boxes.

------
klochner
No one seems to be talking about how venture investors have transformed into
cryptocurrency hedge funds over the past year.

The conversations you see from VCs has similarly changed - instead of talking
about teams building enterprise value, you hear something that sounds more
like speculative bubble FOMO language.

Maybe i'm wrong, feels ominous.

~~~
debt
Batten down the hatches.

It won't be long before investors try to find ways to triple their returns,
scheming and repackaging begins akin to '08\. Derivatives and CDO-esque shit.
You know your 401k will in some way be underpinned by some vast quantity of
poorly rated repackaged crypto assets.

And good luck with regulating this nascent market in Trump's America.

------
panarky
[http://archive.is/ajjKB](http://archive.is/ajjKB)

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jshaqaw
How is a 1% position in a VC fund a monster bet?

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BenoitP
Reddit discussion, with a cached version:

[https://www.reddit.com/r/Bitcoin/comments/7nod60/peter_thiel...](https://www.reddit.com/r/Bitcoin/comments/7nod60/peter_thiels_founders_fund_makes_monster_bet_on/)

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knodi
15-20mill is not a big bet in terms of BTC market.

------
swamp40
Perhaps he has cornered the market(1) for bitcoin, and is even now
manipulating the price...

(1)
[https://en.wikipedia.org/wiki/Cornering_the_market](https://en.wikipedia.org/wiki/Cornering_the_market)

~~~
gruez
15M-20M in bitcoin is nowhere enough to "corner the market". there are
hundreds (?, maybe thousands?) of whales with more ownership than that.

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cvaidya1986
I wonder if he also has money in Ripple and Ethereum.

~~~
zerostar07
Ripple would be too centralized for a libertarian.

~~~
davesque
Is it though? I thought the "Consensus" protocol was just as decentralized as
anything else and is mostly different in that it allows nodes to say which
other nodes they trust. That and it makes more realistic assumptions about how
important it is in practice to avoid history collisions.

From what I understand, the Ripple people are only making libertarians mad
because they're not opposed to making a crypto system which could actually be
easily adopted by existing institutions which does not make them "centralized"
by default. Being able to process more TPS doesn't necessarily make you
centralized.

~~~
pmorici
No, Ripple depends on a handful of so called "validator" nodes. Right now the
handful of validators that exist are all run by Ripple themselves. Double
spend protection in Ripple comes from trusting validators not to defraud you.
So Ripple is neither trust less or decentralized in the sense that the
original Bitcoin whitepaper would describe the concepts.

------
659087
As a bonus, this press release will create a fresh wave of greater fools for
him to sell into.

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aaroninsf
Good. I hope he loses it all.

~~~
dang
Would you please stop posting unsubstantive comments to HN, regardless of how
bad you feel someone is? You may not owe them any better but you do owe the
community better if you want to participate here, the same way you wouldn't
drop litter in a city park.

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martin1975
He bet wrong. Should have made a monster bet on Cardano.

~~~
Nuzzerino
Why?

~~~
runeks
Because they have a vastly superior PR department. And all the company’s
employees have PhD’s.

So you’re bound to get a cryptocurrency so complicated that no layman can
figure out its problems until it’s too late.

~~~
zerostar07
my thoughts exactly (knowing how academics work)

~~~
martin1975
This isn't pure academics. It's applied and constrained by time and resources.
2020 is when IOHK's funding contract expires and renewal is contingent on
performance. They've already proven Ouroboros as valid - I bought ADA, it's
running. Can someone find a hole in it? Sure. The world could also come to an
end tomorrow. Anything's possible. As it is, they've put more rigor than any
coin so far run by "gut feeling" (e.g. testing but without formal proofs)
rather than formal proofs and verification.

IOHK/Charles is pushing for performance, it's not just academic showboating.

Some of the greatest things ever were created when academic minds and
experience were fused with strong business and leadership ethics.. Qualcomm
for example - started out with a bunch of Ph.D.'s and a grand idea - CDMA, or
rather power control and new modulation and coding schemes applied on CDMA,
which is what their invention was (CDMA had existed since WW2 I think,
commercially Qualcomm made it happen).

What bothers people is that most of the stuff Charles is talking about is
flying way over most people's heads...so instead of sucking it up and learning
about it, it's easier to just dismiss him, IOHK, Cardano, etc.

Since I don't know the future anymore than anyone else, you could be right
too. Just in case, I put some money down on Cardano/ADA. So maybe I'll be
right. If I'm not, feel free to gloat.

------
tardo99
I'll just leave this here:

[https://en.wikipedia.org/wiki/Clarium_Capital](https://en.wikipedia.org/wiki/Clarium_Capital)

------
vthallam
This is definitely big. There are already tons of reputed investors from
Silicon Valley and otherwise who started to invest heavily in
Cryptocurrencies.

But bitcoin will end up being a just a store of value(like Gold) instead of an
medium of exchange. What I also wonder is, apart from store of value and
medium of exchange there's hardly any need for Cryptocurrencies. If two of
them solve each of the above problems, why do we need 1000's of alt coins?

~~~
Nuzzerino
Go to [https://www.coinmarketcap.com](https://www.coinmarketcap.com), visit
some of the websites of the listed altcoins, and each of them will (hopefully)
make a case on why their coin is different, and what problem it solves. Many
of these altcoins are made by scammers who want to make a quick buck from a
pump and dump.

For a notable example of an altcoin that solves a tangible problem, consider
Monero. This coin uses a sophisticated transaction system to hide the
identifiers of participants in a transaction. I don't know whether it is
bulletproof, but it does claim to be much safer in terms of privacy.

Another one is Verge, which routes all of its transactions through Tor. I'm
more bearish on this one, and its recent spike in market-cap was short-lived,
suggesting that the idea still needs work.

~~~
Casseres
> Verge, which routes all of its transactions through Tor.

Wouldn't it be possible to use Tor with any coin?

~~~
Nuzzerino
> Wouldn't it be possible to use Tor with any coin?

That's the joke.

