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Comment by nihonde | Hacker News Reader

That’s how markets work. Early adopters take risks that pay off when late-comers try to bet on a proven winner.

Not with Bitcoin.

Satoshi designed the supply to rapidly mint the majority of coins to the smallest group of users for the least amount of effort/capital/work input.

It's designed to manipulate any user who joins the system after you.

Satoshi could easily have chosen a linear curve to align with time, user growth, and increase in work input yet instead the manipulative log curve was chosen.

Old users are now incentived to attempt to psychologically exploit new people by selling the asset for far more than the cost of production or acquisition.

You bring this up in every crypto thread. Do you have an alternative suggestion as to how it should work that could actually be implemented now in a new crypto?

Isn't it fundamentally a bootstrapping problem? A state can reasonably presume to sell a new currency in exchange for older (or foreign) currency— this is similar to issuing a bond or whatever else to raise money. And there's a guarantee of value in the sense that the state will accept the currency later on as your taxes.

The Bitcoin network/ecosystem has nothing to offer in this sense— there's no plausible reason for it to be "raising" money by direct sales, and no one owes it taxes. So the initial tokens were distributed based on the fact that they were mined by early adopters before the difficulty got to be too great. There is indeed a basic unfairness in this, but it's not obvious to me how to resolve it for future projects of this kind.

A linear distribution curve that matches work/watt input. This modestly levels the playing field, although it simply allows existing capital to match the input/output. Satoshi style curves are both capital dependent and skewed disproportionately to the first to arrive within the tiny timeframe.

Anti-sybil attacks would be immensely beneficial. Encouragement of honest economic activity. Scaling of bandwidth and fees.

The ideal solution is a PoW that is computationally useful and desirable, BOINC, folding@home. Ethereum almost does this, but PoW algos as they exist now are anti-scale by design, where increasing computational power does not improve the network at all.

The foreseeable longevity of PoW is ungodly waste, when a world wide distributed computing network has potential far far beyond brute force hash puzzles.

no, it is not how normal markets work. a stock, bond, real estate "generates income". that's why it has value. bitcoin does not.

A) Bitoin is not a stock, it's a currency. It'ss value lies in its utility.

B) There are (a lot of) stocks that do not pay dividends and never will. There are a lot of stocks that were issued by companies that never made a profit. Both of those categories are traded with a value above zero, how do you explain that?

Bitcoin has absolutely no utility as a currency. Look at the current mempool [0] to see why.

People then switch to arguing that it's a great store of value. Given its volatility this makes no sense.

[0]: https://jochen-hoenicke.de/queue/#24h

To clarify: Bitcoin is deeply flawed, and I agree with you that Bitcoin is probably worth less than many people speculate it is worth (but not zero).

Cryptocurrencies in general have a lot of utility and solve real problems.

And yet they introduce a lot of new problems too - problems that have been solved by traditional currencies a while ago. Problems like exchange security and protection to citizens. If my bank goes bankrupt for whatever reason, the government has an insurance for up to 100K for me. When mtgox went down, everyone lost their money.

I'm not sure I agree here. Those are definitely real issues that you've highlighted, but they're not because of crypto currency.

There's no reason that a crypto-exchange cannot be as secure as a bank (or more), and that governments cannot insure crypto deposits up to some value. Those are purely problems for regulators/governments, which have been relatively slow to adapt legislation.

The problems you highlight are real, and can be good reasons to favour traditional currencies, but they're also easy problems to solve - the thinking has already been done once for traditional currencies and the solutions for crypto are mostly identical.

Bitcoin Cash fixes that by following the original vision articulated by Satoshi.

Hahaha, you mean the vision where one wealthy elite gets even MORE power than everyone else?

I suppose it could be even worse though, it could be the upcoming UB fork.

It doesn't matter if a company isn't making a profit. It still has assets - whether physical, intellectual, goodwill, brand, or anything else. If you own stocks in a company you literally own a part of all of these.

That would mean that the value of the stock would be decoupled from financial success of the company, which is clearly not the case. A company with very few assets and record profits every quarter will have an expensive stock price.

One wonders what they're doing with all those profits then. Seems like they would either reinvest in the company (accumulating assets), put it in the bank (fairly literally accumulating assets), or pay it out to shareholders (perhaps the most straightforward way in which stocks are worth money).

A company may also have debts that outweigh the value of their assets.

B) It's straightforward - those companies are very often bought by other companies (because they have intrinsic value). The buyer purchases all of the shares from the shareholders (usually in cash), which realizes the value of the company.

You can say all those things about currency as well.

Someone buys it at a certain price (because it has intrinsic value), which realizes the value of the currency.

the guy I was replying to was saying a ponzi scheme is how markets work, which is definitely not true.

a) this is valid point, but bitcoin is failing currency. if there was a central authority then its value would have been stabilized. never gonna happen with bitcoin.

b) expected income. for bitcoin, it's nil for ever. don't confuse investment with speculation.

You completely mischaracterized my statement. Also, you don’t know what a Ponzi scheme is.

I said that early adopters take risks that pay off when conservative investors are looking for safe plays.

Seriously, shame on you.

i take back what i said. i apologize. i read it not as a general statement but as a defense on bitcoin. taking risk on something that does not have any income potential and passing it off to late joiners is very essence of ponzi scheme.

Fair enough. We’re cool, then!

>Bitoin is not a stock, it's a currency. It'ss value lies in its utility.

hahahahahahahahahahahahahaha

Bitcoin's current transaction fee is like $20, and the value of Bitcoin itself has gone up 25% in the past week alone. If I bought a pizza last week using $20 worth of Dunning-Krugerrands, that same pizza would be $25 this week for no reason. That alone makes it useless as a currency.

Amazon stock actually doesn't generate income on purpose for tax reasons. They reinvest almost 100% back into the company and by appreciating the stock price the shareholders and employees get to sell stock and only get hit for capital gains tax. This is almost exactly how Bitcoin works.

you are confusing between investment and speculation. buying amazon stock with an outlook for income potential is an investment. buying something that has no way of recouping investment other than capital appreciation is speculation. even if amazon pay zero dividend now, you own something that has potential to pay back to you. bitcoin has no income potential whatsoever.

>This is almost exactly how Bitcoin works.

The difference is that if amazon is worth let's say 50 billion and they have 10 billion revenue and 9 billion operating costs then not paying out the excess 1 billion as dividends doesn't mean they magically disappear. A 50 billion company with 1 billion in the bank account is in reality a 51 billion company.

When a dividend is paid out the value of the stock is reduced by exactly the amount that is paid out. If the money is used to buy more delivery infrastructure (trucks, buildings) the value of the stock remains the same. From the perspective of a share holder who can sell his shares to someone else nothing has changed. You either have 50€ worth of stock plus 1€ or 51€ worth of stock.

With bitcoin there is no revenue that can be paid out or be invested. If bitcoin goes "bankrupt" what assets can you liquidate to obtain at least a fraction of it's value? How does it work?

It doesn't have to be a "bet" on a proven winner. Later investors can simply accept lower returns from a proven winner.

Another view is that markets are not about gambling but rather investing? For example, index matched funds grow because the economy of the world, as a whole, is growing.

That is the theory. The practice is that markets crash and people cannot retire anymore. A lot like gambling

Markets can recover. If you invest in stock you have to consider that you may not be able to liquidate it within the next 10 years. What if the markets don't recover? If they don't recover you will have far larger problems than your stock portfolio being in the red. The machines and people don't just disappear unless there is a war.

Even if you fail to do that as long as you have started investing sufficiently early enough - let's say 30 years before retirement (around 35 years old) - you probably have experienced at least one recession and recovery until retirement. If suddenly markets crash during retirement by 50% on an asset that is up by 150% does it matter? You still got away with a profit.

And nobody forces you to liquidate everything at once. So sure if you plan to draw out 4% of your stocks you will have decreased your portfolio by 8% every year.

Index funds are pegged to a lot of activities that look like gambling, but the risks are somewhat hedged by a limited kind of diversification. It’s like betting every blackjack hand in the house at once (setting aside the house’s favorable odds).

Huh? If I have an S&P 500 Index fund, how is that an activity that looks like gambling, or has a limited kind of diversification?

It's narrow index funds that are gambling. Not all index funds.

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