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Comment by polote | Hacker News Reader

What's the difference between BTC and a GOOG share ? Google doesn't give any dividend and the GOOG share has not any voting right. But even the GOOGL share there is a voting right, but Google founders will have the majority anyway.

So what's the difference ? In both case you posses a piece of electronic paper that can be exchanged on a market and there is no other benefit.

Not defending BTC, I'm just curious

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Michael Dell took DELL private. He was able to raise the money to buyout DELL and was able to gain control of their plants, bank balances, etc. He could change how Dell operated and now he can choose to keep the profits within the company, distribute it to owners, or take all of it as his salary.

(note, I’m using Michael Dell as a stand in for whatever the buyout consortium was).

You can’t do anything like that with BTC.

But here’s the thing. Dividends exist. Many public companies pay dividends. The fact that Google does not pay a dividend is simply reflective of the fact that a majority of its owners (which is what shareholders are) believe that any additional earnings are best invested back into Google. (That’s the principle…in practice there are also tax disadvantages to dividends that make them further unattractive).

If a majority of owners didn’t believe that, they can make Google pay dividends.

Google stock has a lot of signals for price: profit, user retention, growth, outlook, leadership, new products, etc. And of course a level of FOMO if people decide that google is the next big thing that may irrationally drive up the value for years.

Bitcoin has a single signal for price: Price. That's why people get in and drop it. This can make for certain feedback loops. But not only in one direction. (that it also has some uses has so little bearing on its price action that its hardly worth mentioning from a price perspective. The two do not correlate, eg, a 50% drop in bitcoin does not mean 50% or even 5% less usage to transfer money from A to B)

Google often buys back stock, so that's money going to investors that comes out of Google's revenues. That's positive-sum for investors. (The amount of money so far isn't nearly enough to justify their market cap, but presumably more will come over the years.)

For Bitcoin, by design, the only possible source of revenue is other investors buying in later. This is zero sum in the long run for investors, and negative sum for anyone currently holding or buying in (since some people have sold). But it's an infinite game so the long run might never come, and you can do well if you don't hold too long.

Isn't Google buying back stock is just another inverstor willing to gamble on value of GOOG stock?

I wonder why corporations buying back their stock is even legal. Isn't it quintessential insider trading?

No, you're confused. Google isn't like other investors because they control the supply of stock. They don't need to buy stock since they can create it. Google owning its own shares doesn't do anything just like writing an IOU to yourself doesn't do anything.

This is a way of returning money to shareholders, like paying a dividend. It's taxed differently because it increases the price of the stock, so it's capital gains.

But after they buy back their shares they can later sell them on the market, right?

Or do they instantly destroy them as they buy them back?

Either way the result is the same, they can buy them when they are cheap and resell/emit them when they are expensive. And they have internal knowledge of the company. And that's insider trading.

I suppose it's true that there is trading happening and there are insiders who are doing it, but that's not what "insider trading" is. A company can use its own information internally to benefit shareholders and it's perfectly legal. Insider trading is when you learn of information that doesn't belong to you. It's a violation of trust.

As I understand it a company does not generally hold its own stock like other investors do [0]. You should think of it more as a sink/source for the stock. So the company can just arbitrarily create as much of its own stock as it wants. Obviously doing this will dilute existing shareholders, so companies won't do this unless there's a good reason to. Likewise, when the company buys back stock, that stock just disappears, so now every other shareholder has a larger fraction of the company.

[0]: I think the main exception here is that there might be an employee equity pool. The board will approve a certain number of shares to be created for the pool, and then they'll sit around and gradually be transferred to employees as their stock grants vest.

A GOOG share has a claim on current company assets and potential future profits.

BTC has a claim of brute force sha256 2x key in the past.

Google has assets (both physical like servers and virtual like user data) and revenue, the liquidation of which can make the shareholders whole.

With BTC, there’s no underlying asset.

But the piece of paper that is GOOG stock has nothing to do with servers.

You can't go to Google give them GOOG stock and say "give me some servers for that, please".

If you've got enough, yeah you can

No, you can't because Larry Page can step in, wave the golden action in your face and say "nope".

> With BTC, there’s no underlying asset.

lolwut

BTC defines computation/energy as a tradable asset -- that's literally the whole point of it.

To clarify the point the parent is making; if BTC goes belly-up, how will you get those “computation/energy assets” returned to the coinholders?

Parent is just pointing out a fundamental difference on how the underlying assets actually relate to the security.

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