Money in general has transaction costs - even cash decays every time it changes hands. Is it all a negative sum game? It seems that in order to make that claim, you need to make some comparison between the value produced and the costs incurred. IMO, crypto is pretty scammy but there is some value (note that crypto is most popular in countries with unstable economies and corrupt governments). A crypto that’s optimized for lower transaction fees could be net positive.
Money in general are traded for productive goods and services, not other kinds of money. That's why it's not negative sum. If you had a bunch of people trading between USD and GBP amd EUR and doing nothing else, that would be negative sum and look an awful like what people do with cryptocurrency.
> If you had a bunch of people trading between USD and GBP amd EUR and doing nothing else, that would be negative sum and look an awful like what people do with cryptocurrency.
That does happen. About a decade ago I dug into FX flows. The trade in USD was eighty times trade flows.
FX is a nasty business, huge profits to be made, profits that can be multiplied by the slightest bit of undetectable (now the traders know how to cover their communication traces) fraud.
Cryptocurrency is pure scam, true. But, in my educated opinion, the international financial system is dominated at the highest levels by out and out crooks.
The state of international finance, how it works against its consumers and saps the life out of the very economic activity it fosters (economic activity at the level we have would not be possible without sophisticated financial systems) is a huge incentive for developing crypto.
I just wish that there was a better solution (even a viable solution) than crypto
Complex social and economic problems do not have simple easy answers.
The difference is that stock, at its core, represents a claim on a portion of the future profits of a business. The business is out there building widgets, supplying people with a service, extracting raw materials, whatever. Most coins are just hollow marketing gimmicks designed to move money around.
Basically all the DeFi ecosystem boils down to trading one coin for another coin, there is no productive work at the core generating value.
This is a textbook distinction, but when I look at my nasdaq and crypto candles, they all have the same 3-year profile, crypto just feels like it’s 1.5x leverage but that’s it. If stock market is all about production and long-term investment, then it shouldn’t bounce up and down with fear waves. The sibling commenter is right, just from the charts it seems at least 66% of “investors” are short-term players and no forward-looking company will (to my limited understanding) build a long-term strategy around these volumes. I mean, they will, but that only confirms the idea?
> The difference is that stock, at its core, represents a claim on a portion of the future profits of a business.
Wow, that's so real, concrete and down-to-earth :-)
> The business is out there building widgets supplying people with a service
Or perhaps not doing these things, but making performative presentations on how its groundbreaking unproven innovation is certain to bring in a lot of money in the future. Or a mix of the former and the latter.
> Most coins are just hollow marketing gimmicks designed to move money around.
One could argue that some, or many, publicly-traded companies - when one considers the listed trade value of their stock - are 10% real business and 90% hollow marketing gimmicks serving as parking space for speculators' money.
The past decade companies have sold debt to raise funds to repurchase stock to drive up stock price so senior management can meet their KPI and get a larger bonus.
This is useful activity for society because senior management deserves more money and they work really hard to earn it. /s
Stocks give you share of ownership over the cashflow that a company generates from its business. Theoretically, that is where the value of stock comes from. Crypto does not generate any cashflows (due to selling no goods or services). So crypto is not like stocks. If anything, it is more like commodities than stocks.
I don’t see one, but that’s a separate discussion. The narrow one is that every crypto-trader’s gain comes at another’s loss. Cash in and out of the system is entirely conserved across all timelines.
If they’re negative sum then so are traditional payment processors that charge transaction fees, which is not an argument I’d be prepared to make. Unless you see something fundamentally different about the nature of those fees in crypto?
It's because you can transfer money without paying fees, those fees are for convenience. You can not transfer crypto without paying fees.
Also, notably most banks will do SEPA transfers for free. There's nothing inherent in money which would make the action of moving it force giving a fraction of it to some other entity.
Indeed, the only disagreement I am aware of is whether the scam being run by multiple entities ("miners") is a significant difference to a Ponzi and so it's a new kind of scam (suggested name: "Nakamoto scheme") or the difference is aking to an LCD vs CRT TV, nothing significant and it's just a Ponzi. But the fact it is a scam is an indisputable and rather simple mathematical fact.
To quote Preston Byrne who coined the phrase Nakamoto scheme:
> The Nakamoto Scheme is an automated hybrid of a Ponzi scheme and a pyramid scheme which has, from the perspective of operating a criminal enterprise, the strengths of both and (currently) the weaknesses of neither.
Someone clearly has to pay to keep to SEPA infrastructure going, be it the banks crosssubsizing from profit on lending or taxes funding organisations in EU level.
Crypto fees are just much more straightforward. You pay a small amount to use the network and there are no strings attached, no hidden subsidy. In theory at least that is because most networks are still funded by inflationary payouts. But no one is forcing you to hold anything more than you need to pay for fees in the crypto currency at any moment in time.
Just like with most things crypto has been widely oversold and 99% of coins are basically scammy penny stocks. No one disputes this. But as someone who has moved internationally quite a bit I would LOVE for all my ETFs and bank accounts to live on an open Blockchain so I don't have to worry about migrating everything when I move to a new country. Even if I don't fully custody them, moving USDC through Ethereum or Solana is just 100x better than any international wire transfer. Stocks are basically stuck in whatever country you bought them in, I don't even want to know how difficult it would be to move my depot from one country to another. You'd have to sell everything.
>so I don't have to worry about migrating everything when I move to a new country.
Not sure what you mean. It's not significantly more difficult that it would be (and maybe easier) to be constantly transferring blockchain assets to local currencies/equities etc. ACATS makes the process pretty straightforward and handles most common financial instruments like stocks, cash, bonds, ETF's, and more. Then you're done, your entire portfolio transferred in a few days. Just choose a good brokerage firm in the first place: ACATS participation should be a prime criteria if you might move country at any point, ever.
Similarly, USDC/Ehtereum/Solana only seem superior to a wire transfer until you have to use them in a local economy. Then converting them to something compatible with the local economy isn't significantly better.
If you're imagining a future where local economies accept these things directly then I think that future is, at best, possible but mostly theoretical at this point. Crypto is not a major threat to sovereign-dictated monetary policy at the moment, and I suspect that the second it appears it might be then there will be rapid action to cut off that potential.
I don't see a way that crypto can bootstrap fast enough around such things when a government can, pretty much overnight, make every business own and retail cashier who accepts a crypto payment into a criminal if they so choose. Gray and black markets might still prosper, but it would make any vision of mainstream use, much less institutional use for things like inter-country investment portfolio transfers completely impossible.
> But the fact it is a scam is an indisputable and rather simple mathematical fact.
And:
> negative sum games and thus are scams
I don't think you know what the word "scam" means.
Merriam Webster defines it as "a fraudulent or deceptive act or operation". I don't think either Satoshi or Vitalik did anything deceptive or fraudulent.
Whether or not something is a scam is not a matter of "simple mathematical fact", but rather of intent.
Whether the operators of mining farms have mens rea is a matter for criminal courts. No one tried to sue them yet, perhaps no one will. Perhaps some aspiring DA will try. Who knows.
That doesn't change the fact they run the scam.
I wrote this up before but here it comes: if there's an empty room and a few people come, play a few rounds of a card game and then leave and the room is empty then it is obvious the sum of their money couldn't change. Some won, some lost but the sum is the same. This is called a zero sum game. If they decide to use plastic chips during the game and only use real money in the beginning and the end, nothing has changed.
However, if someone takes a cut every time the chips are being moved around then that person is guaranteed to win and the players in total are guaranteed to lose and a game where we know who wins without knowing anything about the game is quite obviously a scam.
Your only way to win is to hype up the game and sell your chips to an outsider who will now sit on an even bigger loss. Might not be realized yet but it is there.
That assumes that at the end of the game your bitcoins etc do not have a market value which does not accord with reality. For better or worse people value them like collectibles.
All current crypto"currencies" which use transaction fees (which is practically all of them) are negative sum games and thus are scams.
This is so simple and people waste billions on not understanding it.