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Comment by Torai | Hacker News Reader

So much people with much money trying to find new ways to make money out of money. That says much about the current state of the economy.

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And making the rich richer. No way to invest unless you have money or you are in the inner circle. Code has also not been released. So much for open source.

If it makes you feel any better, I suspect that a lot of these schemes are going to make a lot of rich people that bit less rich...

And a few rich people a bit more rich.

All depends which side of the coin you're on (pun intended).

Well I propose "RobinHoodCoin" with an innovative "proof of no stake" approach!

"RobinHoodCoin" - whatever is mined will get evenly distributed, incl. genesis.

RobinHoodCoin will constantly leak money form large to small wallets

Yep, only accredited investors could buy Filecoin at the ICO. The rest of us can still buy Siacoin which is similar.

I don't think these VC-backed cryptocurrencies will win in the long term. It's the same principle as with stocks, cryptocurrencies are going to work in favour those who understand them the most; in this case, developers.

The mission of cryptocurrencies is to take control away from finance people. Hobbyist developers are going to decide which cryptocurrencies deserve their precious development time.

Cryptocurrencies are all about the tooling and infrastructure around them.

> in this case, developers.

i dont think developers are the ones who will profit - after all, developers are the ones who wrote the code for a lot of financial institutions, and none of them gain much more than just a salary.

At the same time though, 3 of the 5 largest companies in the US have CEOs with a background in software development/computer science. 5 years ago, 0 of 10 did. There's definitely a trend toward developers having more power.

That trend started further back than the last couple of years, as billg can confirm.

and yet, are those CEO's doing dev when they are being paid their large sums of money? They may have learnt something as a developer, but _doing_ development isn't their major money making activity.

jondubois said understand, not do.

Not to be contrary, but "citation"?

This (https://en.wikipedia.org/wiki/List_of_largest_companies_by_r...) lists the 5 largest companies in the US as:

1. Walmart

2. Berkshire Hathaway

3. Apple

4. Exxon Mobil

5. McKesson

Walmart's CEO, Doug McMillon, career at Walmart was in distribution and then buying before moving to the executive.

Buffett had a background in business admin, economics and insurance.

Tim Cook has that CS background.

Daren Woods of Exxon Mobil has a degree in Electrical Engineering in the early 80s, which might be at best half a point.

John Hammergren of McKesson has a pure business background, with a Bachelors and Masters in Business Administration.

Depends on your definition of "largest company". Revenue is one metric. Market cap is another.

https://en.wikipedia.org/wiki/List_of_public_corporations_by...

1. Apple

2. Alphabet

3. Microsoft

4. Amazon

5. Berkshire Hathaway

I think the poster's metric was largest in terms of capitalization and not revenue. The top 5 in terms of capitalization:

1. Apple 2. Alphabet 3. Microsoft 4. Amazon 5. Berkshire Hathaway

https://en.wikipedia.org/wiki/List_of_public_corporations_by...

> Tim Cook has that CS background.

Does he? He certainly has decades of experience in computer companies, but his educational background was, to my knowledge, in industrial engineering.

Well you'd be a fool not to do or negotiate some mining upfront.

Finally a voice of reason in this thread... Man so much hate, somebody is jealous. And is not investors they're putting their money here with liquidity in days not years, and no board seats so you can just chill... I love it.

Crypto currency are the new tulip bulbs[1]. Only some are going to make money. Current buyers are relying on greater fools to take these off their hands.

A crash is eminent so hold tight and wait for it. You will have plenty of opportunity. History will repeat itself as new fools arrive on the scene[2].

[1] https://en.wikipedia.org/wiki/Tulip_mania

[2] https://en.wikipedia.org/wiki/List_of_stock_market_crashes_a...

I'm actually worried that one of the main things in favour of cryptocurrencies is that they can act as an effective currency for illegal activities, i.e. they'll stay profitable for as long as regulations struggle to keep up with them.

I believe that cryptocurrencies only reached a critical mass to be relevant att all because of the value it delivers to criminals.

All that is ever discussed about cryptocurrencies at HN is marginal in comparison.

I think enthusiasts and speculators are actually a significant driver of the high prices. Criminals would much rather have a stable, quick Bitcoin than what we're seeing right now.

I am starting to worry that this bubble is going to grow until it threatens the world economy.

Depends on whether assets or debt will be leveraged for speculation and whether futures contracts will be used as some kind of meta-currency.

Then you have contagions because it will erode trust in other sectors. Economies kinda freeze up without trust or reliable value propositions.

Speculation sure but I don't see how leverage can get too high with a hard limit to the number of bitcoins floating around. Not like option contracts for example where you create as many as you want out of thin air.

Well the leverage would be in option contracts on Bitcoin. These are already available on some exchanges.

See this prescient article, written in 2013: http://blog.gardeviance.org/2013/11/a-spoiler-for-future-bit...

POW can't work at these scales. At $250k/btc mining would burn something close to the equivalent of New Zealand's GDP. As this would be purely electrical energy, energy use alone would be equivalent to that of Spain or similarly sized country.

An extremely small fraction of the inflated value of these coins is actually part of - interacting with - the global economy. Most of it is not and will never be liquid.

Most of it has been and is locked up, not touching other aspects of the global economy, and most of the actual bubble value will vaporize without ever touching any part of the 'real' global economy.

It's the specific reason there is nothing to fear about the inevitable implosion of this crypto-coin bubble. Not to mention, after it implodes, the real money will be made as throughout history (whether we're talking the auto bubble or the internet bubble or the oil prospecting bubble).

The dotcom bubble implosion wiped out trillions in moderately liquid value (the US stock market as one example being radically more liquid than the coin market overall), a sum that makes the crypo-coin bubble look hilariously trivial (even if you inflate it up to $500 billion), the global economy kept trucking regardless; US GDP has expanded by ~80% since the year 2000.

Sun Microsystems during the peak of the dotcom bubble, all by itself, was overvalued (peak market cap near $200 billion, probably worth more rationally $60-$80b tops) by more than 2x the total sum of all bitcoins.

>An extremely small fraction of the inflated value of these coins is actually part of - interacting with - the global economy. Most of it is not and will never be liquid.

I am not sure how you arrived at this conclusion? As more money will move into these currencies, won't it create an impact when eventual crash arrives.

> The dotcom bubble implosion wiped out trillions in moderately liquid value (the US stock market as one example being radically more liquid than the coin market overall), a sum that makes the crypo-coin bubble look hilariously trivial (even if you inflate it up to $500 billion), the global economy kept trucking regardless; US GDP has expanded by ~80% since the year 2000.

Don't you think mania has just started? It took a few years for dotcom bubble to reach its bursting stage.

Serious question: how much money is moving into these currencies already?

Bitcoin market cap was $9.4B a year ago, now it is at $58.3B. Average daily trade volume is ~$1B over the last few months. I guess trade volume just reported in USD, but includes all bitcoin transactions.

Is there a way to estimate how much money from 'global economy' actually moved into bitcoin and other currencies?

Edit: typo

Money doesn't "move into these currencies". Someone has USD, someone has BTC. They swap. That's it.

Or maybe you mean that too much productive capital is being wasted mining these coins? If so, maybe you're right. I'm not sure that has much to do with a crash that would affect the global economy though.

You're not saying anything that couldn't be said about houses in the US Midwest.

> You're not saying anything that couldn't be said about houses in the US Midwest.

So?

The reason it was problematic for people to pour money into housing was that loans (often loans of around 100%) were secured on these assets. No one is currently securing loans on Bitcoin holdings. If they start to, that will be a problem, but I don't see banks ever securing loans on something so volatile.

> Most of it has been and is locked up, not touching other aspects of the global economy, and most of the actual bubble value will vaporize without ever touching any part of the 'real' global economy.

I think the question is how much actual currency will be borrowed against cryptocoin valuations, and how much and over how many generations will people manage to leverage that credit, before that value vaporizes. Derivatives will always be the problem. With the actual economy not producing returns (over 1 or 2%), cryptocurrency may distribute the paper value that investors demand throughout the economy without 99% of people and funds being able to find a mention of any cryptocurrency in their own portfolios.

What is the state of cryptocoin derivatives anyway? Are they being synthetically collateralized? Are they part of any major consumer fund mix?

I feel like it is a lot less like Tulip mania and a lot more like the dotcom boom/crash. I say that in the sense that there is significant utility in some cryptocurrency concepts, but not all of them...however there is widespread overheating due to speculation.

That is also to imply that some may emerge after a crash in the same way that Amazon, Google, eBay/Paypal, etc., emerged and thrived after the crash.

I do not deny the utility of crypocurrencies there will be winners out of this. But current breed of investors will trigger another bout of golbal meltdown.

Even Amazon lost its value during the crash so chances are that most investors sold out everything in panic. Only those who had nerves of iron actually came out alive.

I don't think there's enough money in cryptocurrencies to trigger a global meltdown. It will no doubt have an effect of the economy, but it's still fringe enough that a crash in the near future would be mostly harmless.

At the moment it's not but of this mania continued for some more time it will snowball as more and more folks get in just because they don't want to miss out.

I hope you are right and crash comes early on.

I'm not sure a crash will look as expected. People currently holding the crypto-assets aren't in any rush to liquidate to pennies on the dollars they spent, and there can and has been a long delay before the rallying drums get new money and excitement pumped into it to make the "$100" cost something someone is willing to pay. They buy, the value goes up some, perhaps they sell some to realize they can make a return - it wets their appetite, and they pump more money into it - whether $1000 or $100mm. It's very dangerous for society because it could actually work

According to https://arstechnica.com/information-technology/2017/08/inves... they hardly have any code yet anyway.

We're about to announce our company and do a fundraising round. Relatively small, a few million at first with a limited number of investors, then do a blockchain IPO (yes IPO - we're selling shares with control and dividends, not pointless tokens). And our market is huge with no real coordinated players, so it should be very lucrative.

Even so, I am concerned about letting just anyone put money in. Even though we are an extrajurisdictional company and the SEC doesn't trouble us, I'd like to know people putting money in have some idea what they're doing. At first we thought to limit the amount, require a minimum $1000 or $2000 purchase. But that makes it worse, I think.

What is a company in our situation supposed to do to be socially aware and not just "make the rich richer", while also making sure someone doesn't invest their last $1000? Just put up disclaimers?

And how many computing cycles and kWH are wasted on cryptocoins

To be honest, this is my reason for not jumping mindlessly on the cryptocurrency bandwagon: it's wasting so much resources and power, especially when you take a look at videos of mining farms.

I'm not really in this world, but you'd save more power by recycling aluminium cans (%5+ of US power consumption) than by killing off cryptocurrency mining.

Personally I bring everything I can to recycling points, sometimes even if it's not my own garbage. But I'm aware people don't care.

On the other side the crypto mining is not only the power consumption: it's all the hardware and it's production as well. The ASIC antminers can't be used for anything else, hard to recycle as well and they constantly need to get bigger and faster. For Ethereum, people are buying shitloads of high end GPUs.

I also don't like the idea of storing insane amount of data, hoping to find correlations to make more money, but this is also nothing I can do anything about.

You understand that this article is about a cryptocurrency that uses a service (long term file storage and access) and the proof of work function instead of pointless computation.

Yes, I do, and this sounds like a good idea - emphasis on the sounds, because it's not new, see primecoin.

The whole thing reminds me of one Arthur C. Clarke short story, probably from the 1950s, where a group of Tibetan monks has purchased a computer to generate "all the one billion possible names of God". Before the computer, the monks had been doing the work by hand for centuries.

An American computer engineer is sent to install the machine. He chuckles at the monks' superstition: they claim that generating the billion gibberish strings is a task from God and the fundamental purpose of the universe.

Then the Universe is destroyed when the billionth name is generated.

https://en.wikipedia.org/wiki/The_Nine_Billion_Names_of_God

They made a mistake by not increasing the search space (or difficulty in Bitcoin terms) in order to make that computer faith-compatible.

Filecoin at least isn't based in competition who can do "useless" computation the fastest, but computation only happens to verify data is actually being stored by those claiming they do so.

I'll never understand why this keeps coming up. Energy consumption is not a waste if it has utility, and the bitcoin network has utility. I suppose you could make this argument for some worthless altcoins, but the difficulty for those is low enough that the amount of energy consumed is negligible.

Bitcoin is as worthy as tulips, in terms of intrinsic value.

(Of course the worth of paper currency is the same, still, the backing is stronger)

What will happen when bitcoins are worth less than the cost to mine them is anyone's guess

Paper currency is backed by the presumed continued existence and effective taxing and police power of the issuing state. It might seem theoretical, but if you benefit from the existence of the state, generate value, and don't pay your share to the state in the currency that they demand it in, then your punishment is anything but.

Right, but the total USD value is much greater than the tax obligations of its citizens.

Are you sure? The quickest sources I could find claim it's the other way by a significant margin.

> There was approximately $1.56 trillion in circulation as of July 12, 2017, of which $1.52 trillion was in Federal Reserve notes.

https://www.federalreserve.gov/faqs/currency_12773.htm

> In FY 2017, total US government revenue, federal, state, and local, is “guesstimated” to be $6.56 trillion

http://www.usgovernmentrevenue.com/total

The total USD value is much larger than bank notes. Money in bank accounts and equivalent services is in this context indistinguishable from notes.

The reserve requirements on balances on more than $115.1 million are 10%. That means with $1.56 trillion outstanding you're looking at a ballpark amount outstanding of $15 trillion in bank deposits. That's still not "much greater" than the $6 trillion annual tax revenue.

https://www.federalreserve.gov/monetarypolicy/reservereq.htm

From your link: "Depository institutions must hold reserves in the form of vault cash or deposits with Federal Reserve Banks."

Current balance of federal bank deposits is ~$2.3T:

https://www.federalreserve.gov/releases/h41/current/

Interesting. I'm not sure how to read that balance sheet. For the sake of argument let's say that there's $2.3T is federal bank deposits and $1.5T cash in circulation. If it's all used as reserve balances then that's a total of $38T in bank deposits outstanding. $6T taxing power a year is still not small compared to this!

The intrinsic value of bitcoin is that I can transfer money to anyone in the world, very quickly, for a couple cents of transaction fees, in a way that can't be censored.

Your traditional bank account balance is stored as 1's and 0's in a database somewhere. What is the intrinsic value of those bits?

Now think of how much energy is "wasted" keeping all those accounts updated, the lights on at all the branch offices, etc.

The way they store the information is irrelevant. They also have regulation and mandatory checks and balances on their ability to repay current account holders.

> Now think of how much energy is "wasted" keeping all those accounts updated, the lights on at all the branch offices, etc.

You should do some research before making such uninformed assertion (also banks do more services than just transaction ledgering)

> the bitcoin network has utility

Utility and potential for utility are incredibly different. Bitcoin has no utility. I can't safely store value in it, nor can I use it for quick transactions.

Its only utility is speculative. The energy consumption is fueling a somewhat randomized, opt-in wealth redistribution service. That's not to say I think bitcoin or its ilk are terrible, but rather that the energy, in most cases, could be better used elsewhere (or like, not at all).

It's ok to like bitcoin. But let's not fool ourselves about the bad parts of it.

Mining bitcoins alone is on par with Ireland for electricity consumption.

It doesn't look like Filecoin does this. Proof of stake also solves this problem for other crypto currencies. Ethereum is one of the big ones that is planning to move to PoS. I seem to recall reading somewhere that BitShares will too.

And it is the whole world-wide economy. It is important that they keep this money from the poorer guys too, so that inflation doesn't look high and their investments look promising.

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