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Comment by DenseComet | Hacker News Reader

Its very clear too, looking at the cryptocurrencies with the highest market caps. Very few are inflationary because the goal is to make the founders wealthy.

Take a look at any subreddits for these currencies too and you'll find the same sort of thing too. For example, I think the tech behind polkadot is a neat idea, but go to r/polkadot and all you'll find is discussion about prices and staking rewards.

I have a lot of mixed feelings about the space. A lot of the tech is pretty interesting and is pushing distributed consensus forward. On the other hand, 99% of people involved are trying to make a quick buck.

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I’m not a big fan of that either, but I also understand that it’s probably one of the areas that one can get into with relatively low capital requirements - and arguably it has paid off for a range of people.

While zero-sum games are rare in economics, this is a (sub-)zero-sum game. There is no obvious reason why the crowd spending more time on Reddit should be more deserving than anyone else. In fact there are probably plenty of activities generally considered beneficial for society, such as childcare or volunteering, that are negatively correlated with time spend on Reddit.

So it’s all just redistributing wealth, burning a bunch of it in the process, and rewarding those with early enthusiasm for the idea of turning a lot of money into a CO_2 producing lottery.

>While zero-sum games are rare in economics, this is a (sub-)zero-sum game.

A lot of the positive sum games only reward society collectively if it is cooperative and punishes society if it is competitive.

Pretty much every time there is a balance A = B people in a competitive society will try to increase A without increasing B because that is where they derive their individual benefit. Subsequently someone else will have to decrease their A because B stayed the same and A = B is always true for the entire economy therefore A must stay the same and we get a zero sum game that didn't have to be one. This generally happens when A is considered good and B is considered bad by society.

Here are some examples: income = spending, savings = investments, deposits = debts, produced goods = consumed goods, benefit of externality = cost of externality

Just try to convince people that both A and B are equally important. You'll fail every single time.

It’s not at all clear to me that society wide the total benefit of externality is equal to the total cost.

> There is no obvious reason why the crowd spending more time on Reddit should be more deserving than anyone else.

You don't need to be on reddit. Also you can apply this logic to many things and it will sound good to people that have a bone to pick but will be flawed to everyone else analyzing it objectively.

The objective analysis is that it's an incredibly slow database with features roughly nobody needs or cares about in reality - a solution on a decade long quest for a problem.

Bitcoin is probably the least efficient system humanity has ever conceived of let alone reduced to practice at scale. It's an anti-efficient anarchocapitalist game of musical chairs with the safeties off whose sole job is to redistribute wealth from late entrants to early entrants. It yields no value, and once you factor in the miners, produces negative value from the perspective of the other participants. It's an MLM scheme for the tech crowd. 125X leveraged Herbalife meets a mob casino.

What I suspect the parent was saying is that the modern economic system for all its flaws rewards founders and early builders of businesses who create value for customers, not a random selection of ancaps on Reddit in 2010 who created a negative-sum MLM. It's a perversion - totally unjustifiable wealth inequality. At least you can point to Tim Cook and go, yeah, that guy created value. Giancarlo Devasini? Paolo Ardoino? Pomp? The Winkelvii? Really? Those guys? You sure?

I think you will find in many places of life people are just trying to make a quick buck but in crypto this truth seems to cause a visceral reaction for people.

One of the problems crypto has is that it would be really hard to make a currency that was inflationary and still have any adoption. Bitcoin and others have tried various economic incentives to bring early adopters in and reward them. Is this the best way? Im not sure other coins like NANO have tried to distribute coins early by captcha and this was actually very helpful to people in poorer countries. Ultimately though most of them sold it as soon as they got it and the distribution looks to be about the same as bitcoin and others. Other solutions exist I’m sure but bitcoins decreasing inflation seems to be the best so far if you are making a crypto you want to succeed.

The same logic though could be applied to startups or any business. The first people in do a large amount of the work in helping it grow and are rewarded for that. Maybe too much but that’s hard to quantify.

Also reddit has never been the place to talk about tech. Most of the people buying hardly understand it. If you want to have better conversation they normally have developer channels. And again you could say the same thing about people talking about stocks on reddit.

Edit: a reminder not to downvote just because you disagree. This always happens in crypto threads and really just enforces that you always have the same discourse on them. Sad to see on HN i expect it on sites like reddid.

> The same logic though could be applied to startups or any business. The first people in do a large amount of the work in helping it grow and are rewarded for that. Maybe too much but that’s hard to quantify.

With a business where you hold shares, the business generates cash flow. That cash flow is invested in the business, in share re-purchases and in dividends. This cashflow increases the intrinsic value of each share of the business. The expectation is that holders of equity will be rewarded through the future performance of the business.

Those early folks are rewarded by people who derive value from the system - the customers of the business, whoever they are. They're rewarded for building a business not shilling their equity. The equity value is a consequence of the business being built.

On the other hand the sole source of gains from crypto come from future buyers. Worse, miners, especially on PoW chains, have to be paid and so constantly extract huge quantities of welfare from the system. With Bitcoin, it's something like 20-30 million dollars per day. That gets turned almost directly into CO2 and e-waste. 67MT of CO2 and 6.5kT on e-waste per year.

Early holders are simply rewarded for shilling, hoping someone else will grab their coins for a higher price. It's just an MLM scheme which yields zero intrinsic value.

Ergo, bitcoin is strongly negative sum while equities are positive sum vehicles.

The thing is, most people don't understand the economics or the fundamentals. Those who do get it (especially bankers, ex-wallstreet folks) intentionally downplay it rather than educating folks because they know their paycheck depends on people not understanding. The community pretends or fails to understand and looks the other way. They're all convinced they're "getting in early, on the ground floor of the future of money" - classic MLM stuff.

They're really only superficially similar, in the sense they're traded on brokerage-like services.

Not necessarily.

I work for a bank. Applying your analysis, one could argue that banks offer zero intrinsic value. After all, all they allow you to do is to move money around back and forth between different people.

But, as it turns out, moving money back and forth between different people is a very valuable service. Let me be clear: there are many activities practiced by banks that add very little value to the world. For example, one could argue that high frequency trading (beyond the point needed to provide market liquidity) adds very little value.

But banks allow people to exchange goods and services without having to barter. Banks allow people to store wealth and transport wealth and exchange both with other people without having to move around carts laden with gold and higher huge numbers of guards to keep it safe. Banks help to match together people who have capital ("investors", "savers") with people who could accomplish things if only they had capital ("borrowers","entrepreneurs") and facilitates them working together through interest payments.

Just as banks are far from useless (although some of the things they do add little value to humanity), so cryptocurrencies *MAY* be far from useless (although I agree the majority of people involved at this point are doing little more than engaging in a broad Ponzi scheme).

> I work for a bank. Applying your analysis, one could argue that banks offer zero intrinsic value. After all, all they allow you to do is to move money around back and forth between different people.

What I meant was that it's the bank shares that capture the value you describe, not dollars. And because the bank does create the value you describe, the shareholders of that bank are rewarded by and increase in shareholder equity value.

There's no reason for the intrinsic value of dollars to go up because banks exist beyond their value increase attributable to a growth in GDP as a result.

The role you describe here maps to miners, which are in fact the third party that in aggregate facilitates bitcoin transactions. They are rewarded via block rewards for this service which similarly increases their shareholder equity. Bitcoin doesn't enable people to move bitcoins between wallets, miners do. Bitcoin basically unbundles the services banks provide, but it doesn't internalize them or capture the value they create.

Banks offer loans which help finance businesses. You have a pretty direct connection to people that actually work in the real economy. They are the ones that are paying the loans back after all. Nobody would be crazy enough to take a loan denominated in Bitcoin. The Bitcoin community is basically dedicated to making it impossible to repay debts. Just think about it, every HODLer that joins the community makes it harder to repay your debt because they will never spend their Bitcoin on things your company produces.

It's funny how low inflation or even deflation (if you consider 2% to be price stability) caused a rush of money into mortgage bonds and subsequently destabilized fiat currencies and cryptocurrencies try to beat fiat currencies on their way to becoming useless as a medium of exchange and subsequently make it useless for financing via debt.

> Nobody would be crazy enough to take a loan denominated in Bitcoin.

You have too much faith in financial literacy of the participants in this market. [1] It doesn't really matter as much as you may think because they (1) are using these casino tokens to borrow more tokens to buy yet more tokens and (2) they see liquidations as a natural part of such lending.

[1] https://cointelegraph.com/news/are-we-dumb-financial-illiter...

People take loans denominated in both WBTC and ETH everyday.

At the very least it makes me want to check my watch is still on when someone tries to convince me it's an "anti-elite" invention, despite appearances, as this article seeks to do.

I don't see how it is an anti elite invention. Deflation scales with your networth. The bigger your networth the bigger the income from deflation. The only difference is that the system is new and the elites haven't established themselves yet but it is starting to get old. Give it another 10 years and it will be just as bad as everything else.

Inflation scales with your networth too but it doesn't reward you. You'll have to find an income source to cover the loss. Most inflation protected income streams rely on employing humans.

If you were to pay out a fixed UBI to all people and finance it with inflation then basically people with above average deposits would see the value of their bank account decrease and approach average wealth and people with below average deposits would see the value of their bank account increase and approach average wealth as well.

Assuming inflation = low unemployment holds then incomes would rise vs wealth which would be a reasonable approximation of the theoretical UBI I proposed above.

I’ll read the article again with this in mind but on first read it didn’t come across as trying to convince of anything other than using the gini coefficient isn’t insightful and he pointed out the flaws as he sees it.

It's like every attempt at a great replacement: the incentive is for a group of people to replace another and get the same benefits. Be it a communist revolution, the crypto alt finance or whatever, the hardest is always to build an all encompassing compromise to let people have moderate increase in comfort while not totally shifting the balance in the opposite direction.

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