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Comment by ur-whale | Hacker News Reader

Ripple is everything you don't want in a cryptocurrency:

    - centralized (as witnessed by the fact that the SEC has an actual target to go after)
    - "pre-mined" (initial Ripple crowd gave themselves everything and once in a while toss a handful of XRP to the plebs)
    - controlled by scammers

I'm very glad the ecosystem is doing what it's supposed to: weeding out the weak and ill-formed.

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... but it didn't. The SEC did. XRP has a $40B "market cap", which sums up the crypto mentality in general.

Meh, I don't really get why people think "market cap" is the total valuation of something. If I sold Bob a billion XRP for 1 penny, then I sold Tim 1 XRP for $40, then told Bob not to sell, and Tim can sell his for $40 (because he wants to at least get that much back), then XRP's "market cap" is worth $40 Billion, but in reality it's probably worth $40.

I get that there is a lot more money in it than that, but let's be honest about something, if half the people sold Bitcoin tonight - they HAVE to get out today, it's "market cap" would likely go from nearly half-trillion to probably $300M overnight. Even though technically it should only cut in half right?

There's no such thing as market cap for a currency (after all, market caps are measured as a function of currency), but nobody knows what on earth a crypto unit is supposed to be, do or mean, so it gets weird little slices of each finance category.

According to the SEC, XRP isn't a currency, so it does have a market cap.

I understand within the community that opinions vary.

This applies to every market cap? If every Apple stock holder would try to sell it today, the market cap would plummet.

>If every Apple stock holder would try to sell it today, the market cap would plummet.

This is often repeated but not necessarily true. I don't own a particularly large amount of Apple stock, but if the price dropped even a little bit, and if I knew the drop was due to nothing more than this weird thing where everyone was selling for some reason, I might decide to own more. If aliens sent out a mind control signal that caused every Apple shareholder to start selling, the buyers (whoever they were, maybe the aliens? ;) ) would compete with each other to buy.

To give you a concrete example, let's say I am the only owner in the world of a flying car. One day, I decide to sell it. 100% of the owners of flying cars have decided to sell, but the price would clearly not drop to zero! The idea that everyone selling implies the price will drop to zero applies to pure Keynesian beauty contests where 100% of the value is in owning something perceived to be valuable. For currencies that is completely true, but for companies that is less true.

> This is often repeated but not necessarily true.

This is always true. It doesn't have to go to zero to qualify as plummeting.

I would suggest that my flying car example is one where it's not true. Another example would be intermediate industrial products: everyone who has intermediate chemicals is trying to sell them! Everyone who buys them uses them up as fast as they can, which means that at any given moment, virtually every owner of the intermediate industrial chemical is trying to sell it.

The price of stocks decrease if everyone sells them.

Your examples are incompatible.

Well if everyone is selling then nobody is buying and the quoted stock price remains unchanged.

See how ridiculous it is to nitpick purely hypothetical situations?

It's not hypothetical because it happens. Stocks don't operate in low-entropy hypothetical planes of existence, they trade on markets. If your ask has no bids you lower your ask. Sellers will keep lowering it and if there's no bids it will get very near zero in which case the exchange will likely de-list the stock. A hypothetical where you sell one flying car doesn't illustrate a comparable dynamic.

That argument could be applied to anything

What you're really looking for is the fact that Apple shares have an intrinsic value related to the company's assets and future cash flows. Bitcoin, on the other hand, has an intrinsic value of zero, so it could theoretically plummet all the way to zero. Same goes for some companies' stocks

>That argument could be applied to anything

Yeah, it could be applied to anything. Its conclusion is true for everything. Prices will not actually go to zero when everyone sells, unless there is no intrinsic value.

Apple presumably isn't misleading investors, so its market cap is accurate. Valuations are really just numbers based on supply and demand, so if everyone wanted to sell Apple it would be worth nothing.

What crypto enthusiasts miss is that owning a share of Apple grants you a right to a portion of their current cash + future profits (net of debt). A Bitcoin grants you nothing but that Bitcoin - that’s what people mean when they say stocks have “intrinsic value”. Apple will never go to zero because they have a boatload of cash and the ability to make more. If there are fewer shareholders, existing ones just get a larger portion of the profits but the market cap will never drop below the current cash - debt.

It would but unless we're talking about complete economic collapse there's a bottom to it - Apple's real estate, intellectual property, inventory, brand, etc. all cost something. Even if we completely discount all future earnings (which assumes again Apple never earns a cent - doesn't look plausible unless there's total collapse of the industry). This means there would be people that would be willing to buy at that bottom price - of course, the opinions of people at which price is the bottom would differ, but it's unlikely - again, barring full collapse of the economical system - there won't be any.

With virtual coins, the bottom is literally zero. It is completely plausible that one day just nobody wants to buy $CRAPCOIN at any price. If for BTC there's probably always be some market (one has to pay the ransomware and buy drugs somehow ;) for novelty coins there's no reason to have any hard bottom, and thus no real downwards limit to "capitalization".

Unless you are making a complex hedge investment like options trading, that not interesting.

For long holder, the difference between 10x upside and 1000x upside is interesting, but the difference between 0.9x downside and 1.0x downside is not, because you haven't invested literal all your wealth in the asset.

If you can make more money from shitposting than from apple stock, it doesn't matter that it's technically not zero.

Your example is collusion/price fixing, and is very illegal. I think no matter what is being traded in most jurisdictions.

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

If you remove the collusion, then market cap appears to me to be a fair valuation.

If there is a shock to the system and everyone wants to immediately sell (despite previously wanting to hold), I would argue that to be a sudden change in the valuation.

Actually this thinking is incorrect, at least for company valuations. You're discussing shares being exchanged for arbitrary random values. In a regulated market prices will always be at the marginal level where buyers and sellers exchange at the equilibrium price.

Market cap is only meaningless if the participants in the market are trading at random prices, which they're not.

To validate this theory, just look at M&A. Companies get bought at close to or above their market capitalisation every day of the week.

Except we're not talking about companies, we're talking about currency. Companies have intrinsic value: they own assets, they produce something of value. Currency does not.

Are you trying to tell me crypto will not deliver internet 2.0

Look at the market cap of a company in bankruptcy. Assets are a tiny fraction of a going concern's market cap.

Facebook's main store of value is eyeballs, which can evaporate quickly.

Nothing prevents you from selling a company for any price, and sometimes there's disagreement about company valuation.

AJRD was just bought by LMT this week for a 25% premium, as one example.

People confuse acquisitions with selloffs. The reason an aquisition goes near share recent share price but a selloffs doesn't, is that an aquisition is new information that someone wants the stock, and a selloff is new information that almost no one does.

How can someone track cash inflows to crypto currencies?

This is true for illiquid assets. XRP is a liquid asset, and you could probably move a hundred million dollars or more out of it in a matter of days.

That said, it’s always seemed like a scam to me.

Liquidity is not binary...

All of the bullets in your comment explain why Ripple is bad, and you’ve somehow twisted that logic into justifying that it’s good with your last sentence. It’s elitist at best, outright evil at worst. I’m not really sure what goal it serves.

If your point is that we should just “take all the warning labels off of everything and let the situation resolve itself,” no thanks. I don’t have the time to research the exact origin of everything I put in my mouth. I have to trust that when I buy food, someone out there has at least made an attempt to minimize the chances that it contains loads of mercury.

Are you running extensive tests on everything you eat and drink? The air you breathe? Sure, companies might not want to ruin their reputation by selling such goods, but, then again, we have Ripple. So which is it?

Or maybe I just need to be more selective about which companies I choose, right? Despite seeing exit scam after exit scam, incompetent blunder after blunder, that will surely protect me better than the SEC et al doing their damn jobs.

No. I want oversight. Sure, that doesn’t mean I can let my guard down; I still have to be selective. But at least there’s a pretty low chance that the brand-name toothpaste I use tonight—or the <insert snake oil here> I use instead—is slowly killing me.

Pretty sure the last sentence was a joke. I know with cryptocurrency it is pretty hard to tell.

Based on OP’s comments in a duplicate thread, I strongly doubt that.

It for sure wasn't irony. We're basically all pretty evil dudes.

“We?” I made plenty of money off cryptocurrency, and I certainly don’t support this stance. I will never understand why such blatant toxicity is considered acceptable in many corners of the cryptocurrency industry.

Or maybe irony just gets lost in text.

OP might be falling into a wishful thinking fallacy, and assumes that with time there will be "progress", and somehow - even if it takes many false starts, and we have to go through fire and flames - but we'll end up with a better/great/fair world with a stronger/better/fair cryptocurrency ecosystem.

Also it seems OP considers SEC part of the ecosystem that helps weeding out the scammers.

I think you are misunderstanding their point: The SEC did do their jobs and they shut down this investment scam, which they would not have been able to do in the case of Bitcoin because it's not controlled by a single American business like Ripple.

They elaborated on their stance in a duplicate thread. I doubt I’m misunderstanding.

What are you referring to? I looked at their history but didn't see any such elaboration

The US Securities and Exchange Commission is the crypto "ecosystem"?

If I understand the GP's point correctly, the SEC would be helping to keep the weak and ill-informed around.

What does GP mean?

The GrandParent comment.

thank you

I think GP considers SEC part of the ecosystem (at least as a regulator, or at least as an exogenous market force) that helps keep cull the weaklings.

"Weak"? What a strange adjective to use for such a situation.

Is there an example of a cryptocurrency company that isn't centralized?

You need to use centralized exchanges in order to buy in or cash out. Even small entities trading on platforms like LocalBitcoins need to adhere to KYC laws.

If you were to use cryptocurrency as actual money, I can't see it being cost effective, legal or convenient to only trade with fly-by-night currency exchangers in South America in order to buy and sell cryptocurrency "anonymously".

Bitcoin has centralized exchanges, but no centralized organization or exchange.

Bitcoin isn't a company, though.

Well, the development of Bitcoin Core is highly susceptible to corporate influence as seen by what Blockstream did in the past (which is less now and more diverse), but still, it can happen again in the future should there be any contentious issues in the community.

Why is it that Lightning Network seems to be the only L2 solution with Bitcoin? Because it’s a Blockstream product.

Lightning isn’t a blockstream product - their L2 product was Liquid and it lost to Lightning

Whoops, you’re right.

It’s still odd that Blockstream had significant number of developers working on the core protocol.

It was founded by core developers.

What about mining pools? Top 3 pools now have more than 50% of hashing power (meaning total control of the network), and corporate agreements between 3 entities are not exactly rare.

I once bought BTC from an ATM. Paid cash. Absolutely no KYC.

Those have cameras and if you look into darknet busts, a lot of people were de-anonymized through Bitcoin ATMs.

How come people don't do the minimum precautions? I mean just wear a hoodie, a cap and sunglasses. And IR LEDs for bonus points.

Except for your third point, those are true for most cryptocurrencies that are actively being traded, with a few exceptions.

It is certainly true for Ethereum, which pretty much invented or at least popularized the ICO concept, and that is the second most traded cryptocurrency in existence.

ripple is not the same as XRP

ripple could disappear and XRP would still exist and and otherwise be functional

> I'm very glad the ecosystem is doing what it's supposed to

It's still up 128% over the past year. I'd guess this will actually have a Streisand Effect and the added publicity will cause the price to rise in the semi-short term.

Ethereum was also 60% pre-mined, somehow VCs behind it are able to protect it but i agree Ripple is the worst

Saying "60% pre-mined" doesn't really make sense without more context since the supply changes over time and currently has no cap. There was 60 million eth pre-mined for the initial sale (and another 12 million for the devs). Which, all in, makes it approx 64% of today's supply.

they're only fine because they did it cleverly via a Swiss Foundation if they did it via US company, they would be hit with similar lawsuit

I wonder how that translates to stablecoins. Tether seems sketchy, but USDC seems solid.

- USDC was regulated from the start and has been submissive to regulators. I don't foresee issues for them.

- Ripple blatantly flaunted regulation from the start.

- Tether is illegal for U.S. persons: "Any individual who is a U.S. Person and any entity that is a U.S. Person is prohibited from using the Site or any Services" (https://tether.to/legal/) They are unregulated. I've called Tether "Satan hell spawn" to people that ask me about it.

You summarized this very well!

A lot of post-Bitcoin "cryptocurrencies" are nothing but a cargo cult: https://www.youtube.com/watch?v=qmlYe2KS0-Y

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