Crypto Dabble.

Aegis

darren232002 said:

Aegis said:

The tokens do not grant a fraction of the ownership of the underlying company

They grant a fractional ownership of the underlying protocol, which is essentially the same thing. Arguably, more powerful - I'd rather have a stake in a monetised version of HTTPS than I would FAANG.

What?  No they don't, any more than having a few coins in your pocket grants you partial ownership of the UK currency system.  I'm 100% certain they are very different forms of ownership.

Aegis said:

They don't give ownership of the intellectual property

This is an open source world. Nobody cares about IP in crypto. Our moats are built in other ways.

Then there's a good enough reason for me not to invest. IP matters enormously to me. One of the companies I invest in announced a distribution deal this week, which led to a surge in the price of the share. Why? Because the share allows participation in that deal through part ownership of the IP. To me, that's sound investing, though at the speculative end of the risk spectrum because the company could go bust instead of finding a lucrative deal.

Aegis said:

The owners aren't entitled to a fraction of either wind-up value or future revenues

Sorry to burst your bubble here, but they are indeed entitled to a share of future revenues.

Go right ahead and burst my bubble. Show me how ownership of 1 BTC gives any entitlement to revenues generated by the network. My contention is that no, they aren't. Miners get revenue because they are effectively providing functionality to ordinary holders, but those ordinary holders don't get paid just for holding the investment.

HCIMbtw

Couple of things Aegis, not with BTC but with proof of stake networks your coins/token can be used for the purpose of validating transaction on the network in a system,  you earn like a royalty if you will on providing them for the assurance process. You literally get paid for just holding the investment.

On your second paragraph I do not think a decentralised system can have IP, this is indeed the part of the strength and appeal in that there is no central ownership. The lack of IP also doesn't prevent a scenario like the example you gave from happening in crypto. A network might be further developed to provide further functionality, e.g. allowing it to be used by a particular sector or industry for a particular purpose, and your stake in that would in all likelihood change in value to reflect the new use case. 

User232002

Aegis said:

What?  No they don't, any more than having a few coins in your pocket grants you partial ownership of the UK currency system.  I'm 100% certain they are very different forms of ownership.

Then there's a good enough reason for me not to invest. IP matters enormously to me. One of the companies I invest in announced a distribution deal this week, which led to a surge in the price of the share. Why? Because the share allows participation in that deal through part ownership of the IP. To me, that's sound investing, though at the speculative end of the risk spectrum because the company could go bust instead of finding a lucrative deal.

Go right ahead and burst my bubble. Show me how ownership of 1 BTC gives any entitlement to revenues generated by the network. My contention is that no, they aren't. Miners get revenue because they are effectively providing functionality to ordinary holders, but those ordinary holders don't get paid just for holding the investment.

You are conflating Bitcoin with the many other types of tokens that are out there. I suggest again that you read HCMIbtw's post because attempting to have this discussion with someone that doesnt know the difference between BTC, ETH and UNI is pointless.

I vote on governance proposals frequently and have seen protocols change structure/code/revenue streams because of votes that I have participated in on a weekly basis. In this world, all the good protocols are basically owned by the users.

IP simply secures a moat. Being first with a large network is often enough of a moat on its own. Especially if incentives are aligned with the users of that protocol. If you want a world based on IP you are welcome to your traditional investing world; but IP can lead to stagnation and lack of innovation too. Crypto will out compete traditional banks for this reason alone.

In BTC, no they don't. I would never say they did. That's your misunderstanding. But you can get paid by simply holding ETH due to how its protocol works. And a boatload of others will pay you too. There are protocols generating billions of dollars in revenue every year by providing value to the ecosystem, and since they are majority owned by users - where do you think that revenue is going?

tebbins

HCIMbtw said:

Now to the questions - How do you value crypto? 

It's difficult, one argument I have heard put forward is metcalfes law, which essentially says the value of a network is proportional to the square number of nodes within it. Essentially valuing a decentralised system on its scale of use. But I believe with systems like ETH, SOL, DOT you can also model application for use in potential industries for trade. 

What is bitcoin backed by? 
Belief and finite supply. A lack of belief in the central regulation of FIAT currency, the ability of it to be printed in perpetuity without bEing underpinned by an asset.

You are buying shares in something? 
Yes and no, in some circumstances it can be like a share in terms of governance, but in other instances it is just a currency, and in other instances it is an asset running a network. 

Personally I see most value in the network crypto like ETH, SOL, DOT and others which underpins apps will be needed in future. If you own the asset you wont even need to sell it to generate value, you will be able to stake the asset. Where people who don't own it, pay to use your asset and you generate interest and passive income from allowing your asset to be used to run the network.

An NFT is essentially a collectible.
Why should "backing" or underpinning currency with an asset (which?) Make it worth more?
Your last para makes no sense.
Your para on valuations makes literally no sense, Metcalfe's law is not applicable to this... At all...

Aegis

HCIMbtw said:

Couple of things Aegis, not with BTC but with proof of stake networks your coins/token can be used for the purpose of validating transaction on the network in a system,  you earn like a royalty if you will on providing them for the assurance process. You literally get paid for just holding the investment.

Which is an interesting feature, but it conflates with various claims made in this and other threads that bitoin is the only crypto asset which has calculable value, the others basically being useless.  The biggest problem with such fractional revenue participation is that the income stream is denominated in that cryptocurrency, so the supply necessarily increases to pay each person holding it and providing verifications.  Functionally this is the same as the network deliberately inflating away the holdings of each person who doesn't provide those verification services, so it effectively just becomes a transfer of value from the holders to the active participents.  That might be seen as a good thing, but it's certainly not the same as the entitlement you get to revenue that you can use to settle your tax bill, for example.

Genuinely good to talk about this with someone that doesn't want to just call me an idiot, by the way!

On your second paragraph I do not think a decentralised system can have IP, this is indeed the part of the strength and appeal in that there is no central ownership. The lack of IP also doesn't prevent a scenario like the example you gave from happening in crypto. A network might be further developed to provide further functionality, e.g. allowing it to be used by a particular sector or industry for a particular purpose, and your stake in that would in all likelihood change in value to reflect the new use case. 

The lack of IP is basically why I don't consider any crypto assets akin to share ownership.  You can make an argument that it's closer to commodity options if you essentially replaced the underlying security with a cryptographic token, but that just screams at me to avoid it.

HCIMbtw

Aegis, please read my post on the last page, it explains quite a few points you are questioning. ETH is setting up to also burn its network tokens as part of transaction to avoid the diluation you talk about. 

P.s. i definitely don't believe bitcoin is the only currency with calculable value.. i actually find bitcoin much harder than others like ETH to value and disagree with a lot of points made by zola.. just couldn't be bothered with that debate

Aegis

HCIMbtw said:

Aegis, please read my post on the last page, it explains quite a few points you are questioning. ETH is setting up to also burn its network tokens as part of transaction to avoid the diluation you talk about. 

P.s. i definitely don't believe bitcoin is the only currency with calculable value.. i actually find bitcoin much harder than others like ETH to value and disagree with a lot of points made by zola.. just couldn't be bothered with that debate

Cool, will do.  If I have questions, do you mind me coming back here?

Aegis

My main question is still how you work out the value of one coin against another, especially if you are comparing one that was initially a clone of the other.  If the argument is that a measure of the widespreadedness of a network is the method of valuation, then I can at least start to think about how that works.  The main issue I have is that in traditional investments, an asset is worth the same whether concentrated into 10 owners or spread into 1 million.  In this model, the entire asset value would increase going from 10 holders to a million without any actual change in the asset itself, which strikes me as unusual to say the least.

It may be worth comparing the tokens which confer some utility to carbon credits.  These certainly have utility, but were never intended to be investments when first concocted, but the limited supply and the utility combined together to give rise to some really abusive sales and attempts to ramp up prices or sell well over market level.  Unfortunately people will get excited over the "next big thing" periodically, and you have price increases completely detached from any fundamentals.

User232002

Aegis said:

Which is an interesting feature, but it conflates with various claims made in this and other threads that bitoin is the only crypto asset which has calculable value, the others basically being useless.  

In many ways, calculating the value of other tokens is far easier than BTC. I would disagree with whoever said that.

Aegis said:

The biggest problem with such fractional revenue participation is that the income stream is denominated in that cryptocurrency, so the supply necessarily increases to pay each person holding it and providing verifications.  

Yes. This is a problem for all proof of stake chains and is one of the key things environmentalists miss when they question Bitcoins proof of work necessity. They are attempting to bootstrap a network by subsidising the initial use and incentivising participation. If they can get big enough quickly enough, or provide value in other ways, to enable them to reduce emissions whilst simultaneously retaining users they will make it. Many chains will not get through this chokepoint.

The reward denomination issue is simply one of risk management. Its a reflexive structure and price can go up as well as down. For tokens I did not believe in, I sold my rewards in to USD as soon as I received them. For tokens I believed in, I held them. This is how you can get 140% APY on an asset that does a 10x whilst you are getting that rate.

Aegis said:

Functionally this is the same as the network deliberately inflating away the holdings of each person who doesn't provide those verification services, so it effectively just becomes a transfer of value from the holders to the active participents.  

Not all networks have inflationary emission schedules or the inability to accrue value as a bystander though. ETH for example. 

Aegis said:

Genuinely good to talk about this with someone that doesn't want to just call me an idiot, by the way!

I'll happily provide information when you actually ask reasonable and thoughtful questions.

Aegis

darren232002 said:

Aegis said:

Which is an interesting feature, but it conflates with various claims made in this and other threads that bitoin is the only crypto asset which has calculable value, the others basically being useless.  

In many ways, calculating the value of other tokens is far easier than BTC. I would disagree with whoever said that.

Aegis said:

The biggest problem with such fractional revenue participation is that the income stream is denominated in that cryptocurrency, so the supply necessarily increases to pay each person holding it and providing verifications.  

Yes. This is a problem for all proof of stake chains and is one of the key things environmentalists miss when they question Bitcoins proof of work necessity. They are attempting to bootstrap a network by subsidising the initial use and incentivising participation. If they can get big enough quickly enough, or provide value in other ways, to enable them to reduce emissions whilst simultaneously retaining users they will make it. Many chains will not get through this chokepoint.

The reward denomination issue is simply one of risk management. Its a reflexive structure and price can go up as well as down. For tokens I did not believe in, I sold my rewards in to USD as soon as I received them. For tokens I believed in, I held them. This is how you can get 140% APY on an asset that does a 10x whilst you are getting that rate.

Aegis said:

Functionally this is the same as the network deliberately inflating away the holdings of each person who doesn't provide those verification services, so it effectively just becomes a transfer of value from the holders to the active participents.  

Not all networks have inflationary emission schedules or the inability to accrue value as a bystander though. ETH for example. 

Aegis said:

Genuinely good to talk about this with someone that doesn't want to just call me an idiot, by the way!

I'll happily provide information when you actually ask reasonable and thoughtful questions.

You've made it clear that you won't, so I really don't see how you want me to change.  Do I need to fully embrace the crypto way of life before my questions would be considered reasonable and thoughtful?