
Bitcoin as a Game - collapse
http://jpkoning.blogspot.com/2019/11/bitcoin-11-years-in.html
======
aazaa
> The premise behind bitcoin-the-game is that the current wave of buyers must
> guess when (or if) a subsequent wave of buyers will emerge, this second next
> wave's participation being contingent on when (or if) they believe a third
> wave of buyers to emerge. If they guess right, the early birds win at the
> expense of the late ones. ...

This is a truly tired analysis. It goes by various names, including "greater
fool theory." Notice how it applies to almost every asset being traded today?

Stocks? Remember dividends? Not so much these days. Poster child is Amazon,
but there's a slew of others that offer virtually nothing to investors other
than price appreciation.

Government bonds? Do do negative interest rates sound? You buy one of these
because either you have to or you think others will have to.

Real estate? Please. Take away price appreciation driven by easy money and few
would bother "owning."

What this piece ignores is the world's ever-encroaching governments and the
ongoing assault on privacy - with money as the fulcrum.

~~~
XorNot
Stocks represent actual ownership in the company, potentially voting control
of the boards decisions.

Government bonds are backed by the full force and trust of the government they
represent, and repay the face value plus yield promised _at the time they were
bought_. They represent the most reliable yield you can get.

Real estate? You mean that thing you live in?

This is all a bunch of a false equivocation with one goal: "please buy my
Bitcoins and give me USD for them"

~~~
askmike
> Stocks represent actual ownership in the company, potentially voting control
> of the boards decisions.

A company is an abstract concept around a group of people, framed inside a
legal entity. But yes, if you own many stocks you can sit at the table with
some big boys. Most companies come with less risk than Bitcoin. But I rather
buy Bitcoin than WeWork shares (assuming they list).

> Government bonds are backed by the full force and trust of the government
> they represent, and repay the face value plus yield promised at the time
> they were bought. They represent the most reliable yield you can get.

Until a government defaults. This doesn't happy every week, but ruling out
that it doesn't is not the best investment strategy.

\---

I'm not denying Bitcoin is speculation, but so is everything else. Sure
Bitcoin might be more speculative under your frame of reference. But it's not
black and white.

~~~
eru
> But I rather buy Bitcoin than WeWork shares (assuming they list).

Depends on the price. Thanks to limited liability, WeWork share can never be
worth less than zero. And just liquidating their existing office supplis is
probably worth at least a few thousand dollars. But, of course, you'd have to
pay off creditors first.

If WeWork lists and doesn't go under, and assuming even a weak version of the
efficient market hypothesis, the price their shares trade on will be about
'right'.

> Until a government defaults. This doesn't happy every week, but ruling out
> that it doesn't is not the best investment strategy.

Agreed. Though in the developed world, inflation is usually the bigger worry.
(Unless you buy inflation indexed bonds.)

~~~
IllogicalLogic
I find people's lack of knowledge about what makes Bitcoin valuable
interesting.

The reason Bitcoin is valuable is because the work required to create one is
significantly harder than Fiat currencies and it is one of the only truly
scarce assets in human history (hard cap).

How much equipment do you need to counterfeit any fiat currency? Can you
purchase the equipment for less than $10k?

Yes, easy.

How much equipment do you need to counterfeit Bitcoin? Can you purchase the
equipment for less than $1 billion?

No, not easy.

You may think this is a trivial distinction but it has tremendous value
knowing you have hard uncounterfeitable money with a hard cap.

The US treasury spends hundreds of millions of dollars a year fighting fake
bills, that's only 1 of the dozen or so problems bitcoin solves. The second is
that all the verification and security is done by the most powerful
supercomputer in human history.

These things gives it its value.

Garbage company stocks, you can throw those in the trash if the central banks
aren't busy helping pump them.

Hard money wins, soft money gets snuffed in the night.

~~~
eru
What are some falsifiable predictions of that theory?

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Thorentis
Well, you could apply this to almost any of the highly abstracted financial
instruments currently traded. Derivatives, options, etc. People claim they're
"investing in real companies" (which at a very low level they are), but most
of the time what is actually happening, is you are betting on whether _other
people_ will invest in the company, or what investor sentiment will be x
months down the track. You aren't directly investing in the success of the
company, you're investing in the investor confidence in the company. Buying
stocks directly is of course, at least a bit different.

I see Bitcoin as much the same. Sure, it _could_ be used as a real currency,
in the same way that I could use options or bonds as real currency. I could
ask you if you'd be willing to sell your car to me for x number of options I
currently hold. But I haven't created a new currency, and the value behind
that "currency" is just the investor opinion of it at any given time.

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solotronics
Somebody probably made the same arguments when the first paper money was
printed and when the first government fiat came about. This is the next money
and it's important because corrupt governments can not steal it or devalue it
by printing.

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obilgic
Then I would say gold is exactly the same. In fact, gold would be a riskier
betting game as information is less transparent (estimating supply, how fast
It's mined etc) compared to bitcoin.

~~~
layoric
Gold has a actual use as a commodity, eg in electronics and other equipment,
and derives a minimum value as such. So whilst how gold is used in trading
circles might have similarities to BTC, this difference IMO makes them nothing
alike.

~~~
JohnJamesRambo
Bitcoin has a just as relevant, or more so, actual use in buying drugs and
frowned upon things on the internet, escaping government restrictions on
money, etc.

~~~
LanceH
Gold has those same uses but at an international level and is generally
approved of. The gold may never actually move, but ownership will transfer
between countries.

~~~
JohnJamesRambo
But you have to use a middleman or intermediary. The genius of bitcoin was
when Satoshi removed that and solved the double-spending problem in a
decentralized way.

>Bitcoin: A Peer-to-Peer Electronic Cash System

~~~
ickelbawd
Except that bitcoin relies on a whole network of middlemen to prove the
validity of that transaction. Without miners you have no transaction.

------
seibelj
So many articles about Bitcoin and cryptocurrencies today! I've devoted a lot
of my career to blockchain, and here is my brief summary:

\- Blockchain typically means a tamper-proof, distributed database.

\- Smart contracts are like stored database procedures.

\- Blockchains allow you to transact valuable assets - even billions! -
without needing to trust your counter-party.

\- However, you _must_ trust the underlying software! This is a fundamentally
different risk from usual financial transactions where you trust the
institutions servicing the exchange, but not necessarily the counter-party.
This turns finance upside-down!

\- People can create financial products and services - even extremely complex
ones - without any governmental permission, or if they need a real-world
presence, permission from a regulatory body that is very amenable. And once
granted, it's very easily to transact globally!

\- If your curiosity is piqued, check out my blog post I wrote a while ago on
MakerDAO and their decentalized stablecoin. It's fascinating!
[https://medium.com/@james_3093/the-dai-stablecoin-is-a-
game-...](https://medium.com/@james_3093/the-dai-stablecoin-is-a-game-changer-
for-ethereum-and-the-entire-cryptocurrency-ecosystem-13fb412d1e75)

\- Cryptocurrency and blockchain are some of the most debated, and IMO
misunderstood technologies of 2019. They are interesting from not just a pure
computer science perspective but also economics, philosophy, and psychology.

~~~
dragonwriter
> However, you must trust the underlying software! This is a fundamentally
> different risk from usual financial transactions where you trust the
> institutions servicing the exchange, but not necessarily the counter-party.
> This turns finance upside-down!

No, this is just normal finance: most of the financial service industry is
providing exactly what blockchain provides—a way to have a trusted set of
institutions and processes in places of trusting counterparties.

It's different that the crypto world likes to pretend it's just the automated
processes embedded in software that need to be trusted—until those processes
produce unacceptable results which requires social intervention, revealing
that, yes, ultimately it's still trusting people—whereas traditional finance
is overt about social constraints backstopping blind process.

~~~
seibelj
It's not the same. If the bank messes up a multi-million dollar wire transfer,
you have recourse. If you mess up your multi-million dollar Bitcoin transfer,
you have no recourse! Period!

------
dpc_pw
The author just described how bitcoin has property of money (being a
speculative bet that a given asset will carry value in the future), and
deduced that bitcoin is not money.

~~~
astrodust
That's not what money is.

You're describing futures.

~~~
Acrobatic_Road
Bernard Lietar identified one of the modern properties of money as indeed
speculation. 99% of forex is just that.

~~~
astrodust
In banking and finance everything is speculation. Pork bellies are
speculation. Gold is speculation. That they consider money to be speculation
as well is just a matter of perspective.

Outside of that world it's not speculation.

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Zimahl
The problem with the Bitcoin game is there is no longer the 'millionaire
overnight' scenario as a possibility. Sure, you could buy 1 coin and it could
go up 10x, yet you'd still only be (at this time) $90k richer. Which isn't bad
but the big climb from decimal places up to full dollars is where there was
more possibility. Common folks can take a gamble on 100 coins for $1 a piece,
they really can't take a gamble at $3k+ per coin. Thus, that's why we sit in
the $3k to $9k range. Too few people to join, too many people holding on
because they bought at a higher price.

I also don't think psychologically people want to own a decimal place of
something but that's a different issue. If people could still buy 100
bitcoins, they'd probably do so.

~~~
JohnJamesRambo
A 10x is actually fine by me.

~~~
Zimahl
Like I implied, yeah, it would be fine with a lot of people. But that's not
the same as buying 100 coins for $100 and then those coins are worth $10k each
and you're a millionaire. That big multiplier is what got people interested in
the first place, but it's gone. The equivalent of that now (with coins at
$9.3k) is 100 coins at $933k. Sure, to make a million you just need to just
over double the bitcoin price but you need almost a million dollars to make
that happen.

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jl2718
He’s looking at Bitcoin in terms of dollars, but dollars also have zero
utility, so they have to be traded for something, and there are an awful lot
of them created every day. We’re way overcaptilalized, so most of this is
going into speculative investment rather than consumable utility. In that
regard, it hardly matters what form that speculation takes, the prices are
mostly determined by capital flows rather than internal returns.

------
Igelau
Fantasy Baseball : MLB :: Cryptocurrencies : Wall Street

------
retpirato
To me it's like any other stock, except more volatile. When you use it for
payments it's like selling some of your shares in a stock.

------
cryptica
Bitcoin is gambling but the entire economy is also gambling. Luck is the only
significant differentiator between winners and losers.

The reason why capitalism kind of works is not because it rewards productive
people but because most people believe that it rewards productive people.

The economic incentive to work or invest is rooted in deception. Not so
different from Bitcoin or anything else.

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p1necone
I think this article is kind of missing the point. Literally any tradeable
thing can be used for speculation like this. The problem with bitcoin is that
it seems to be _primarily_ used for speculation.

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alwillis
This is one of the worst anti-bitcoin articles I’ve ever read.

Bitcoin is no game; over $7 _trillion_ has been transferred since 2009:
[https://blog.coinbase.com/charting-the-course-of-
bitcoin-11-...](https://blog.coinbase.com/charting-the-course-of-
bitcoin-11-years-and-counting-b4e17969d4e1).

We’re seeing the beginning of a new economic good being created right in front
of our eyes and many of us won’t realize this until many years later.

