Crypto - why do we need them?

[valuebuddies]

The whole world has pumped more than 2 trillion into Crypto and I still cannot understand why. To me all these coins are baseless, created out of thin air and wasted unnecessary electricity. When the Bitcoin is first created, is it supposed to be replacement for fiat currency, but now we see the dramatic ups and downs in prices, who would still use Bitcoin as currency? 

Can somebody engage in friendly debates, to convince me that the crypto is not bull shits. 

Let's have a look of the crypto bug, the most famous Michael Saylor says: https://www.youtube.com/watch?v=coHC_9ApBdg

[weijian]

hi valuebuddies,

For a start, the entire crypto market is around 2 trillion, doesn't mean that 2 trillion of liquidity has flown into crypto. It just means that prices have been bid up to 2 trillion market capitalization.

Next, there is a very big difference between crypto (which is a subset of blockchain/distributed ledger technology) and crypto that is used as a speculative vehicle.

I suggest you to read 2 threads below and discover for yourself

Crypto as blockchain: https://www.valuebuddies.com/thread-8510.html
Crypto as speculative vehicle: https://www.valuebuddies.com/thread-3136.html

[valuebuddies]

Sorry for creating a new thread on this topic, but being a crypto bear, i find it purposeless to read a lenghty thread on things that i dont believe.

To me crypto is not blockchain, it doesn't mean that u own a pcs of blockchain technology if u have some crypto. And it also doesnt mean that all crypto owners know and understand how blockchain works. No one is able to monetize the benefits of blockchain from owning of crypto. Please correct me if I am wrong.

Its more of speculative instruments to me. I believe most people buy crypto is not an act of de-dollarization, its not because of the blockchain, its not because of anything fundamental. But instead, its the anticipation that the price would double in 6 months, 10 folds in 2 years.

Crypto is a perfect speculative instruments because there is no fundamental, no valuation, and no basis and no limit.

If you have a pcs of Bitcoin, am I right that u are expecting the Bitcoin to become 100k a coin in the next year or 2? If yes, then is this value investing?

[Wildreamz]

Hi valuebuddies, there are many schools of thought.

1. The Bitcoin (or insert any other Crypto) Maximalist
Fiat is worthless as Fed and other central banks keep creating money out of nothing. Bitcoin is secured by Math, and is finite, it cannot be created by any single entity; hence, it's the only medium of exchange that is neutral and trustworthy. In the future, people will only believe in the value of Crypto and not any fiat. Future economy and technologies will be built on top of the Bitcoin economy; hence, in order to engage with that corner of the economy, the only choice is by owning Bitcoin. Bitcoin will be worth much more in the future, because it can be used to buy many valuable things, that could only be bought by bitcoin.

In fact, eventually Bitcoin will replace Fiat one day. Hence, Fiat is worthless. They only measure their own net worth, based on how many bitcoins they own.

2. The Libertarian
Similar to Maximalists, Libertarian believe that runaway inflation is coming by the Fed irresponsible money printing, and thus, needs to own asset that is not controlled by central banks, and can't be inflated. They used to be Gold Bugs, but since, gold has been underperforming as a hedge to money printing in recent years, Bitcoin is the best alternative.

3. Bitcoin/Ethereum/DeFi (or any other crypto) Technocrat
Yes in the future Bitcoin (or any other crypto) will be use as the backbone of many decentralized technologies (DApps, DAOs, smart contracts, NFTs, metaverses etc.); Bitcoin would be worth more in the future, due to it's many utility. But it will not replace fiat.

4. Investors
Don't know what the future holds, but since more and more smart people and institutions want to use Bitcoin as a medium of exchange, they are betting on it to increase in value as transaction volume and adoption increases. Volatility is high, hence expected returns too. It also might offer a non-correlated asset that might hedge inflation risk, volatility risk of their other investments.

Many are also mining cryptos and investing in businesses that makes an income on top of the existing crypto economy (e.g. Crypto exchanges like Binance and Coinbase, Crypto wallets, mining companies like Riot Blockchain, DeFi yield farming, Crypto consultancies, Crypto investment funds).

5. Speculators
They just want to sell the asset at a higher price.

Most are probably some combination of the above.

[weijian]

Sorry for creating a new thread on this topic, but being a crypto bear, i find it purposeless to read a lenghty thread on things that i dont believe.

To me crypto is not blockchain, it doesn't mean that u own a pcs of blockchain technology if u have some crypto. And it also doesnt mean that all crypto owners know and understand how blockchain works. No one is able to monetize the benefits of blockchain from owning of crypto. Please correct me if I am wrong.

hi valuebuddies,
There is no issue with creating a new thread here.

When we don't believe in something, and then we don't read about it --> Isn't there a tinge of irony here? ie. if we don't bother to read about something, how can we be affirmatively sure of our belief of disbelief? Are we putting the cart in front of the horse, or the horse in front of the cart?

Education is changing an empty mind, to an open mind. And Charlie Munger has constantly reminded us to the effect that the best way to move forward, is to always try to knock down our prior beliefs or best ideas. This is very similar to the school of thought for the black swan analogy - the way to disapprove all swans are white, is to try looking for a black one.

Rather than asking for opinions, may be the better way is to read and synthesize the facts yourself to come up with your own? It is a good way to move forward to be independently minded in an interconnected world with so much noise and chatter.

To be honest, the questions you asked, are already easily answered if you had read through those threads.

I do not desire to feed you the fish, but hope to direct you to fish yourself. You will find the fishing skills you pick up, help you tremendously in your investing endeavors.

[ongweehiang]

The whole world has pumped more than 2 trillion into Crypto and I still cannot understand why. To me all these coins are baseless, created out of thin air and wasted unnecessary electricity. When the Bitcoin is first created, is it supposed to be replacement for fiat currency, but now we see the dramatic ups and downs in prices, who would still use Bitcoin as currency? 

Can somebody engage in friendly debates, to convince me that the crypto is not bull shits. 

Let's have a look of the crypto bug, the most famous Michael Saylor says: https://www.youtube.com/watch?v=coHC_9ApBdg

There is Crypto and there is Blockchain but what if they are almost the same?

I had been in the midst of dwelling into DeFi. The DeFi space is really interesting and chaotic but there is some very interesting concept bubbling up. 

Just published an article which I touched on a hybrid Crypto, Blockchain and Business? 

Maker - MKR. 

2021 Quicktake #2: Maker Dao - Weighted (weightedresearch.com)

MKR is really interesting to me as it is a decentralised autonomous organisation (DAO) which is really similar to a cooperative structure. It is still early days and it is getting really "messy" (check out the MKR forum), but it is an experiment which I am keen to find out if it will work. MKR is not the only one around operating this business model but I think they may be the only truly DAO.

Follow us @ www.weightedresearch.com

[weijian]

Adam Neumann of WeWork fame does come to mind with all the talk of "community" and stuff.

This thing to continue to pretend (it works) until it (really) works. Axie Infinity would be a proof of concept for many other people who try and try something different, until one concept finally sticks.

Axie Infinite Jest

Axies are like Pokémon. They're little blobby monsters that you can trade, fight, and breed. New players need to head to the game's marketplace to buy some before they can start playing the game. As of Friday morning, the cheapest Axie for sale cost $43. And you need at least three to really play the game. And to buy them you need to deposit Ethereum into your Ronin wallet from another wallet, like Metamask. And if you use a broker like Coinbase to buy and trade crypto, that means you'll need to transfer Ethereum at least three times before you own your first little monster. Also — and this really pissed me off — there were gas fees for trading between the Metamask and Ronin wallets! When I tried to transfer a bit just to buy an Axie, it wanted to charge me $100 in gas fees.

As one of Axie’s co-founders explained in a recent interview:
We need to think about Axie as more than just a game. We can see it as an entire civilization with an economy, even a language, right? There are certain things that Axie community members say that only makes sense to other Axie community members. We have our own culture and entertainment. When you think of it like this, it’s a little bit more complex. We’re just in my opinion at the start of building this really advanced and new type of society that hopefully will last for decades or hundreds of years.

https://www.garbageday.email/p/axie-infinite-jest

[weijian]

No matter what kind of models game use - free to play, buy to play or freemium, the bottomline is that games must be "fun to play" for a start!

“Play-to-earn” and Bullshit Jobs

There is some logic to the idea that the game could sustain a mix of players, some of whom are net recipients of capital and some of whom are net contributors who are in it for a good time. This is how other in-game economies have sustained themselves. I’m wholly unconvinced that Axie Infinity is headed in that direction, frankly, because it just doesn’t look fun enough that people will pony up upwards of $1,000 to play it for its own sake. Informal polls, unscientific as they are, seem to bear this out.

https://paulbutler.org/2021/play-to-earn...Sh**-jobs/

[CY09]

https://www.cnbc.com/2022/12/03/celsius-...ocess.html

One common thing about crypto firms collapsing is due to them having insuffiicent funds/assets to pay for withdrawals.

"The former employee told CNBC that when customers deposited crypto assets with Celsius, it was supposed to ensure those funds were available any time a customer wanted to withdraw them. However, Celsius was taking customer deposits and lending them to risky platforms, so it didn’t have the liquidity to return funds on demand.

As a result, when customers wanted to withdraw funds, Celsius would scramble to purchase assets on the open market, often at a premium, the person said."

It has allowed me to appreciate why the banking sectors are regulated by Basel regulations and the need to have interbank lending mechanism to protect each other while money acts as a currency. Crypto firms should have learnt from this and built their own system mirroing it such as having their own Basel and Interlending. With the lack of this, many firms took unnecesary risk and now are imploding. I'm quite sure the current bankruptcies are not the last ones because many crypto companies around the world likely took on too much risk/balance sheet mismatch. Without their assets being returned or freezed due to crypto counterparties being liqiudated, there is going to be a liquidity crisis in the crypto space.

[¯|_(ツ)_/¯]

@cy - let me share a strange tale and what I'm trying to says is financial market or our economy is no different from Crypto. Everything is based on trust!

A man go to a hotel and decided to stay for 10 nights.  He paid $10,000 to the hotel and then go up to his room.

The hotel quickly run to a renovation company nearby and then pay up the $10,000 renovation fee that was charge (on credit) for renovating the hotel.

The staff of this renovation company quickly run to a material supplier company and quickly pay up $10,000 that they had owed for buying tools and materials in the last few months.

The material supplier quickly run to the hotel and pay a hooker for the service that she performed previously.

The hooker quickly run to the bank and pay off $10,000 of personal loan.

Everyone very happy because all their debt had been paid.

Few minutes later, the man who had inspected the hotel room changed his mind and decided not to stay in this hotel.  He go downstairs and demand his $10,000 to be return. 

Well, the hotel quickly goes to the bank and borrow $10,000 and return to the man.

Nothing happen.  Nothing had happen.

The end result is instead of everyone in debt, now, only the hotel is in debt. 

---

Back to Crypto (an innovation to me).
Crypto is using Blockchain and I'm very sure Blockchain will one day taken over the current centralised (centrally controlled) mechanism.  When, nobody could be sure, but one day, Blockchain (technique/mechanism) will be here to stay - no doubt in my mind.

As for Crypto currency, it's also very clear to me that if there is only one that could survive then that would be BTC.  If there is a second one, then that would be ETH. Both will survive because they are highly sought after - be it now, in the past or in future.