Ether Is the Digital Currency of the Moment
nytimes.com
nytimes.com
$200 mil for a browser with no users.
$1.5 billion for a coin that was twice renamed to hide that it was premined.
$500 million for a Reddit with less than 1/10000 of Reddit's users.
$30 million for PotCoin.
$350 million for DogeCoin.
The list goes on and on. If BAT was a normal company, would someone buy them for $200 million? Would someone pay $500 million for Steemit? These valuations sound insane, but that is what people are paying.
Can you compare a currency market cap in USD to a company valuation??
Who is "buying" a cryptocurrency....?
Eg: If a company has 200M shares, and someone pays $1/share during an investment round, the company (and the press) will mention that the funding was done at a $200M valuation.
The same logic is done to calculate crypto currency market cap. If there are 200M coins, and someone somewhere pays $1/coin, the market cap is reported at $200M. This is, however, the total value of all coins of that currency. Often, the person(s) or company that created a coin won't own most coins (unlike with company shares).
The currency can't "go out of business", as it's entire existence is a speculation. Anyone using a given currency speculates that it will be accepted tomorrow.
It probably also points to a large difference between a new blockchain _Currency_ and a token _Asset_. The latter often being a proxy for company shares in an ICO.
You can compare the market caps in a sense. A company with 1000 shares worth $10 each has the same market cap as a cryptocurrency with 1000 tokens worth $10 each. The $10 price is the highest price people are willing to buy the share/token at. In economic terms, they're quite equivalent?
That's where the similarities end. A token does not mean ownership. It doesn't mean a share of profits. Tokens do not necessarily have any rules about how many there will be.
More practically, a single person owning 100% of a cryptocurrency would likely reduce the value to zero. Owning 100% of a company, you can at least sell its assets.
So there's no "seed valuation" where a startup may be priced much more accurately based on what it's worth right then. In the ICO/crowdsale pretty much the peak potential valuation is included in the price. Kind of like if Facebook was doing its first round of investment (when it was still a site for colleges-only) and it would raise $100 billion from that first round.
This model seems very flawed, because it's very hard to price a company 10-15 years into the future accurately.
I'm a Software Engineer, but I decided to play with cryptos. I invested $4,000. So far, I've made $108,000. Yes, I'm speculating. But everybody does. Speculation is how all the businesses work. You buy low, sell high.
What's more interesting is that I have $100k to invest into my pet project. At that point, overvaluations create other businesses, which is generally a good thing.
I've done the same as you, but only got in seriously a while later. I've exchanged my initial investment for fiat and might lock-in some of the unrealised gains too.
That they put '$' in front of amounts and include 'currency' in the word cryptocurrency is essentially a trick because society is habituated to the word currency and the $ sign as a signal of a currency - something as value in their mind; this misuse is similar to why you can't call yourself a chiropractor if you haven't gone through the training, people trust that title by default.
The fact they've adopted the $ sign and 'currency' is perhaps even fraud; they have monetary gain to look forward to from the result they're hoping/speculating for. And so far they seem to be successful in overlaying the concept of the dollar with these tokens and gaining traction with it.
The "$200 mil for a browser with no users" value is based solely on what the last people bought the tokens at - however it's not quickly liquid and I believe most of these popular blockchain token platforms have taken VC money - real USD - to give themselves a runway to survive. Essentially it's a trick to consumers for exactly where your confusion comes from; people in the ecosystem try to justify it by equating it to being like buying stock in a company but this is much more in reality, even if you can overlay that concept too.
If the finance people and media keep considering this real currency - they will continue to trick people until the point people actually believe it, and then there will be an unfair and unreasonable buying power shifted towards early adopters of Bitcoin or Ethereum's Ether et al; it acts very similar to a Ponzi scheme, where the first people in get their promised '20%' and it is the last people in the scheme that lose out, except with this blockchain token scheme it is much more subtle because of it being global, distributed/decentralized. This is another play by Big Finance to transfer a huge amount of wealth without the general population being able to realize it, and the only 'work' they're generally doing is pulling levers to get this ecosystem more and more adopted; because you found a way to transfer a lot of wealth (perhaps 40%+ of global wealth would shift to early adopters, I haven't seen projections - the earlier you adopt, the bigger piece of the pie you'd get which is in part why people want to start their own token) by creating a new global currency, and that reward isn't just IMHO.
From my current understanding it's a Ponzi-like scheme that's different in that it is global, decentralized, and mostly anonymous - which makes it much more dangerous. There are so many people in this global network that the value can drop, and there can be no return for a long period and it will survive because no one's knocking on your door - or there's no SEC to then investigate a like a Ponzi-scheme artist - especially because the issuer is the blockchain token itself, however everyone in the global ecosystem is working together to make others adopt it - so it's not as easy for the SEC as focusing on one individual.
The goal now with these blockchain tokens is for the holders to increase the use/adoption with the general public, wanting them to believe they have any value at all. They seem to be doing this by giving starting their own token, and giving away a bunch of it. In the case of Kik, they're giving away 10% which they equated to 1 trillion parts in what they're calling Kin - leaving them with 9 trillion more to play with - distribute for free or sell.
I do believe in the positive aspects of blockchain, however the current algorithms for distribution . Through some mechanism the value of a legitimate cryptocurrency ; not the mechanism that once enough people have adopted it that it will stabilize, at that point the wealth has already transferred to the early adopters - all because they stayed in the game to create a new currency and got other people to start playing. I am still hoping to find projections of how much wealth is and would actually be transferred depending on when a person adopted.
Ether as currency is a disaster waiting to happen.
https://medium.com/startup-grind/i-was-wrong-about-ethereum-...
People are speculating on it because they have confused companies using the technology as using the currency itself.
(Disclosure: I bought ETH one month ago for development using these 3 tools).
In the meantime they're being careful to stay compatible, and contributing development resources to the public project. JP Morgan is working on an open source client that bridges private chains with public.
Even using the public chain doesn't mean they're using ETH, but lots of startups on the public chain aren't using it either; nevertheless ETH seems to be maintaining its position as the dominant Ethereum currency, and it will play a unique role in proof of stake.
BitCoin has a genuine inherent worth now and while it's still not nearly large enough to fend off crashes, it's there and it's growing. I don't see the argument for why Ethereum is different in this respect.
Perhaps I'm just not getting the real point of the linked article?
Does it? Why? I mean, people currently want to buy it, but then in the early to mid noughties people wanted to buy securitised junk mortgages; simply having a potentially temporary demand does not mean it has an _inherent_ worth.
If anything, it has less of a worth than before, in that its "success" has made it largely useless for actual transactions. Look at the current costs to actually get anything through; it's stormed past SEPA and threatening to hit Western Union levels of expense (it's already exceeded Western Union and friends for small transactions). What is it _for_?
Just to serve as devil's advocate here:
Nothing has an inherent worth, unless you postulate the existence of "worth" as an immaterial label, like "soul".
BitCoin clearly has worth to some people right now. They keep buying it.
Well, tulips are also quite useful. You can't decorate your garden with Bitcoins...
It seems odd to me that if the utility of anything were a physical thing as measurable as the mass of any physical object that thing wouldn't still have an "inherent" utility/worth. Are you thinking about "inherent" in the sense of have some sort of Platonic existence? That would be a very odd way of using it.
Either way, since utility is unique up to scalling (e.g. Johnny could get as many times of it from a sandwich as Paul does from a near-identical sandwich), at least in choice theory "worth" is closer to having an "inherent" character than otherwise. Though this is somewhat of a stretch because these kind of comparisons are invalid.
Johnny, who is dying of thirst in the middle of the Sahara desert, would get much more utility from a bottle of water than Paul, who is sitting in a bathtub in his apartment in NY. So what's the worth of the bottle of water?
There still doesn't need to be an appeal to anything in material in order to define worth, not anymore than one needs to appeal to something immaterial do define weight in terms of mass. Have the utility of water be proportional to the thirst of the person, where thirst is also a definable physiological state, with "worth" being a scale factor. Thus "worth" would have a uniquely defined value regardless of person or situation.
Or at least that's one way to do it.
Valuations 101, by William Shakespeare.
That worth may fluctuate and it may not be worth something to you in particular, but it has a value.
Cryptocurrencies only have worth because they have demand, not utility. There is not inherent worth based on their existence. This doesn't make them less valuable, it just means their value isn't inseparable from what they are.
But one can always invalidate arguments by taking to them to the extremes. After all, you can't prove anything exists, so how can any of it have inherent anything?
It's a global immutable ledger that allows for the irreversible transfer of funds without needing to trust a 3rd party with the control of those funds.
Additionally, there's a cap on the total units of account that can exist.
Many people find a lot of value in all that, especially when compared to the slowness, surveillance, and inflation of traditional electronic monetary systems.
Furthermore, aren't the "lite" alternatives more functional in this regard?
Huh? It does?
Beanie Baby valuations looked stable for a while until suddenly they weren't.
I'm reminded of the joke about the atheist and the christian where the atheist says to the christian "We believe in basically the same thing. I just believe in one less god than you".
I'm still yet to see any cases where any of these coins or tokens perform better than a centralized system(and can continue to perform better at similar utilization) or where the value of the distributed system is worth more than the cost of distributing it. But I've been surprised by the communities before so maybe I will be again.
Silk road?
They would have made a lot if they held them all to today but back when the donations peaked 100btc donation was $600.
I think they're demonstrably more efficient even on paper. If everyone accepted a cryptocurrency and you could prove this anytime and anywhere.
The issue is people aren't going to switch their store of value, and perhaps they shouldn't. But I'm not sure how the current legacy banking system functions better in any regard except for reversing transactions. And there is an argument to be made that this introduces more vulnerabilities.
Can you demonstrate this for me now because I'm honestly not sure what you mean.
Cryptocurrency value transfer involves none of that, and is confirmed in 30-45 minutes at most AFAIK.
I can do a wire transfer today from my Australian account and have it in my Canadian account tomorrow. Same for US->Canada, US->Australia and Canada->Australia. So it definitely isn't always 3-5 business days.
I'm going to assume you're american? America has basically the worst banking system in the first world and a lot of americans don't actually realize how far behind their banking system is.
Cryptocurrency value transfer involves none of that if you already own cryptocurrency. But you almost certainly have gone through the traditional system to buy your cryptocurrency so you aren't really removing that inefficiency.
Adding to that the inefficiency in interbank transfers is artificial. Should crypto start to take off I'm pretty sure you'd quickly find that the traditional banking system finds a way to do instant international payments.
>and is confirmed in 30-45 minutes at most AFAIK.
My last bitcoin payment was unfortunately just as someone started to spam the network a month or so ago and actually took just under a week as my fee ended up being too low even though it was an acceptable amount when I initiated the transfer.
Yes, that's really something. I suppose I shouldn't be that surprised.
>Cryptocurrency value transfer involves none of that if you already own cryptocurrency.
Yes I should have been more clear, but I was considering Crypto within the context, since switching between any currency would usually come with a cost at exchange rate and purchasing power, or remttiance in many cases.
The benefits of Crypto that I have heard are only applicable if both parties in a transaction are using Crypto.
I would agree that banks may start innovating once Crypto reaches a critical mass, some have already invested into researching how it would be done.
As a side note, my (and I speculate many others as well) inclination toward decentralized currency is simply for the political possibilities, as I think (referring to the US) the banking system is perhaps the strongest pillar of oligarchy here.
I also don't think that monetary controls can be apolitical by nature, so a method of decentralization that enables democratic influence over it is very appealing to me.
Your last statement touches on issues that make me worry whether Bitcoin can be one of those options, but I'm open to the possibility. I think at this point were Bitcoin to fork and not fully recover, others would be filling a void. The future seems more likely to have a myriad of different currencies and I wonder if we'll look back on this as the "currency boom". There are of course still very real geopolitical ramifications for these things and I await much stronger reactions from more powerful nation states.
As another aside, I think it's likely that the less developed nations will flock to cryptocurrency. Possibly extreme examples could be philanthropists developing solid currencies for such cointries, or foreign governments deploying them as a method of control.
No thanks.
http://www.coindesk.com/united-nations-sends-aid-to-10000-sy...
Not a pyramid scheme.
Without immutability, the blockchain will eventually lose all of its differentiating features, and have no value proposition.
But I think the parent comment is wrong about Ethereum being 'less immutable'. Either a blockchain is immutable, or it isn't. A year ago, for one moment, Ethereum was mutable. But that was a unique situation that Ethereum will never find itself in again:
It will never be that small of a community, and have that little happening on the blockchain. It will never be that young. Ethereum's leaders will never fail to that degree to properly warn people about smart contract security.
The Ethereum community will never be that inexperienced with smart contracts, both in terms of their security properties and their economic properties (the DAO was the very first smart contract of its kind, and had a goal of attracting $500,000 worth of ETH, and instead $150 million worth was deposited). Now that the community has gotten a lesson in how smart contracts work, there will be much less sympathy for anyone who loses ETH they deposit into one. It's buyer beware at this point.
So the likelihood of another hard fork happening to reverse a hack of a third party Dapp is extremely low in my opinion. Ethereum is for all intents and purposes immutable right now.
Can you do this without centralization?
>Without immutability, the blockchain will eventually lose all of its differentiating features, and have no value proposition.
Right my point is though that for most people immutability ISN'T actually a value proposition. It's a risk.
No, this is a service of centralized parties, which are free to use the blockchain. My point is that an immutable blockchain can have both mutable and immutable services, while a mutable blockchain can only have mutable services. The immutable blockchain therefore has a major competitive advantage over the mutable one.
With respect to immutability, it is important for some critical applications, like money in countries that restrict economic rights. If you live in Venezuela for example, you will not want your wealth in the form of a digital currency that's stored on the servers of a company in another country, because that server could eventually be shutdown, or have its ledger altered by the trusted third party running it. Your government is a powerful organization after all, and could lobby the government of the country where the server is held to force the company to restrict people from your country from using its banking services. Or that country may try to punish your country's government, by sanctioning all Venezuelan nationals, which again would lead to you losing access to the ledger.
You want you wealth in the form of a digital currency sitting in a decentralized network that maintains an immutable ledger.
If you live in a country like Venezuela couldn't they just shut down the internet and make your savings worthless overnight?
Regarding Venezuela, there may be situations where the government is willing to shut down your bank account or prohibit meatspace financial institutions from letting you as the client use other currencies, but isn't willing to go as far as shutting down the internet. So in that scenario, an immutable ledger would have value.
Also while the Venezuelan government may be able to prevent you from accessing the rest of the global internet, it can't shut the global internet down. So as soon as you leave Venezuela, you can regain access to your savings.
And FDIC style insurance does not work with a fixed currency, so you don't want to use these banks.
What about if someone steals your savings? How much do you value immutability then?
I've been looking into cryptocurrencies a bit lately and from a technological standpoint it's exhilarating. Witnessing the internet centralize itself more and more around big platforms this past decade, it really is a breath of fresh air to see those highly complex and advanced distributed systems. And technology-wise ethereum is really an amazing concept on its own.
There's also so much left to do! How will those systems scale up if they're supposed to replace "fiat" currency and your Visa card? Currently that's a big debate in the Bitcoin community, with the push for Segregated Witness support while other petition for increased block sizes etc...
But because there's so much money at stake the technical discussions are surprisingly rare. For something that's mostly "just code and maths" it's insane to read all these discussions where so many people throw around unsubstantiated arguments when it's not complete FUD. As far as I can tell Bitcoin forums these days look more like a conspiracy theory subreddit (or alternatively a political subreddit, is there a difference nowadays?) than hacker news.
Is there a cryptocurrency out there that's more about experimenting with the technology rather than a Get Rich Quick scheme? If I had more time I think I'd just start writing my own coin miner from scratch just to see how it works in details.
The only benefit (IMO) of using a cryptocurrency is the ability to participate in the black market. The current financial system for all its warts does a good job at facilitating trade.
My advice would be to treat any speculation into digital currency as gambling. Don't spend any money you can't afford to lose, take some money off the table if you happen to be winning.
Same holds for virtually any cryptocurrency although the tech gets a bit more complicated (for example zero-knowledge proofs used by Zcash are not that easy to comprehend and explain).
There are many benefits of cryptocurrencies, one of them is IMHO pretty important - it is much harder to manipulate the prize of currency, or to create new amounts of currency at will - everything is backed by math and computational power.
As for coins getting stolen: Ethereum users regularly make use of "bank vault" smart contracts that can time lock funds as a protection against thefts.
As for people doing "naughty things" with Ethereum: No, there is no central entity that maintains "anti money laundering" information on transactions.