[vocatus_gate]

I'll try to use my elevator pitch:

With cryptocurrency, you're right they're not an "investment" in the traditional sense. Right now more of a long-term gamble.

In my opinion the value is in the network and the ability to move money instantly (or at very least faster than traditional methods), securely, to anywhere in the world for a fraction of a cent. That ability alone is valuable and hasn't existed until now.

There are other arguments along the lines of deflationary vs. inflationary, anonymous vs. private, irreversibility of transactions (no charge-backs) that are good or bad depending on your views, but in general crypto represents a brand-new "investment" (or gamble if you like) for this generation.

The different cryptocurrencies that various teams are building follow different philosophies, but I think the space in general is pretty interesting.

[unclesams-uncle]

> In my opinion the value is in the network and the ability to move money instantly (or at very least faster than traditional methods), securely, to anywhere in the world for a fraction of a cent. That ability alone is valuable and hasn't existed until now.

I spent some time working in a relatively-unknown but high volume clearing bank.

Banks can and do move billions instantly, and have done so for years through SWIFT and ACH. It takes literal seconds for a confirmation to pass through different clearing networks around the world.

Even today, we're seeing banks improve their correspondence networks with each other.

For example, you could have a Transferwise Account where you receive USD and convert to GBP.

If you wanted to move that to a Monzo account, you can do so instantly as Transferwise and Monzo have accounts either with each other or in the same institution.

The bank debits and credits each counterparty immediately.

At the end of the day, it nets its position, then sends its report to the central bank, netting positions between other participants.

Looking at crypto from the outside, I really don't see the added value based on existing infrastructure.

It seems more like a proof of concept rather than a viable long-term asset.

[clarky07]

so why does it still take me 3+ business days to move money between banks? I assume it's just because they use that float to make money, but it still sucks. i for one like transactions clearing in a few seconds rather than a few days.

[joosters]

It's because you don't live in the EU. Millions of people have had instant money transfers for years now.

[mettamage]

But this is the power of bitcoin right? Now I can live in South America and get near-instant (crypto)currency transfers as well.

[short_sells_poo]

In fact what parent is saying is that fast transaction speeds are not something that are solely enabled by bitcoin. There is absolutely no technical reason why transfers have to take days between banks. That's just down to the banks in your country having a crappy infrastructure.

In fact, among the interesting properties of Bitcoin, I'd rate transaction speeds as the least relevant - chiefly because network throughput and transaction speed is actually pretty poor if you compare it to what is achievable with classical tech.

[ZephyrBlu]

> There is absolutely no technical reason why transfers have to take days between banks. That's just down to the banks in your country having a crappy infrastructure

This is one of the reasons crypto is a great solution though. You don't have to rely on institutions for the infrastructure.

[mettamage]

> There is absolutely no technical reason why transfers have to take days between banks. That's just down to the banks in your country having a crappy infrastructure.

I agree that there's no technical reason. For example, "crappy infrastructure" is an economic reason why fast bank transfers wouldn't work. I'm evaluating bitcoin as a political/economic tool.

[badestrand]

That's not really a unique value proposition, as there are PayPal (and probably others) for many years already. And PayPal is free for private transfers, compared to BitCoin's ~$5/transaction.

[mettamage]

I wonder if everyone has access to that. And for the people that don't, I wonder if they have access to bitcoin.

[ravingraven]

I live in the EU. I don't have instant money transfers (they are within the day but not instant). Across EU countries it still takes days.

[thesimon]

Wrong banks then. I can instantly transfer money between my accounts in Ireland, Portugal, Germany, Latvia, Belgium and The Netherlands.

[JxLS-cpgbe0]

Some wire transfers are instant and they are much more expensive than BTC or ETH

[notreallytrue]

But then the money is immediately available and I can buy a new pair of shoes with it

Honestly, how much money one needs to move that the cost of the operation actually matters?

[notreallytrue]

For the same reason you vote for the president in October and the guy is actually elected in January

[pwm]

The fundamental point of bitcoin is that you don’t need banks. Whether that’s good or bad will be debated for years to come.

[notreallytrue]

You don't need banks to transfer money, you need them for loans

[JxLS-cpgbe0]

SWIFT gpi can't compete with Ripple on a number of important issues. Ripple transfers don't pass through multiple banks and the actual value of the XRP is transferred, not just the data (of the SWIFT ledger).

> Banks can and do move billions instantly

We're not just talking about banks, and if I open my own bank tomorrow I can't use SWIFT the same day (the way I can with Ripple), I have no relationships with correspondent banks.

This is the added value to existing infrastructure.

[diab0lic]

I think what the grandparent post is trying to make clear is that there is no technical impediment to moving money instantly as some others have claimed here. It isn't that the amazing technology of blockchain has allowed us to achieve this for the first time. The reality is that this completely unregulated space is allowing people to sidestep a bunch of regulation and thus move money faster. If crypto becomes an issue the powers that be are going to do one of two things;

1) Regulate crypto such that it isn't an issue anymore and is in line with existing systems.

2) Improve the regulation such that the existing monetary systems move money more quickly/easily/whatever.

Crypto has an edge in neither of these situations.

[JxLS-cpgbe0]

> there is no technical impediment to moving money instantly as some others have claimed here

Yes, there are quite a few where crypto has an undeniable advantage, I listed a couple.

> has allowed us to achieve this for the first time

That is wrong, we have never been able to use the improvements to the 45+ y/o SWIFT network (Ripple creates) that we can today.

> Regulate crypto such that it isn't an issue anymore

How will you require correspondent banking when 200+ banks are already side-stepping it?

> make the existing monetary systems move money more quickly

How would you make SWIFT settle accounts more quickly?

How would you remove the incredibly high prices on traditional wire transfers?

[JoshTko]

the cost/speed of transaction value of Bitcoin is probably overstates vs existing alternatives. The real bitcoin advantage is that bitcoin transactions require no authority's approval in order to make the transaction. Meaning you can still make the transaction even your residing country decides you are an enemy of the state. Imagine having the power to control your finances as you wish even if you are a dissident in an authoritarian regime.

[jonahss]

The "anywhere in the world" part is really huge. As of now, most cryptocurrencies aren't run by nation states, unlike traditional currencies. Cryptocurrencies have to potential to become a global currency that's fair to all.

I actually think that the nation states really missed out when they didn't mint their own cryptocurrency that has the same value as their physical money. If they controlled a currency completely, they could tax every transaction! Surprised they didn't jump on this.

[eruleman]

Central Bank Digital Currencies (CBDCs) are incoming — 2020s will be the fight of MMT vs BTC as Balaji says.

[xur17]

I honestly think CBDCs are complementary to Ethereum, Bitcoin, etc.

[iamspoilt]

Okey, calling it a "long-term gamble" only sounds fair to me.

Talking about value, isn't blockchain / crypto analogous to a medium that enables moving money quickly? If yes, internet would be similar in some sense (we have instant local money transfers these days) but we don't have anything that tracks internet as an investment.

Coming back to it, I can rationalize myself investing in a money transfer business that is build on blockchain (think Transferwise that uses a mix of technology and banking agreements) and generates some revenue for me. But if that middleman can be removed, I cannot suddenly start considering that piece of technology, an investment.

[aboodman]

Any cryptocurrency can be used to move money quickly. So if you buy a cryptocurrency, you are automatically "investing" in that "business". You don't need Transferwise.

Bitcoin is the canonical example. The value investment argument for Bitcoin is that you think Bitcoin is (or will become) a good way to move money. You're buying a scarce piece of that utility.

===

Some cryptocurrencies additionally have other utilities. Example, ethereum can be used to write very slow, shitty software that runs on the blockchain. So far nobody has come up with a super amazing use case for this, but theoretically, if somebody did this would dramatically increase the demand for ethereum tokens - (b) above.

A better example would be something like https://handshake.org/ - a cryptocurrency that is trying to power a decentralized replacement for dns. Remains to be seen whether this can be done and will have adoption. These systems have all the problems of traditional startups, plus all the problems of low level protocol development, plus standardization problems, plus novel math.

However, I hope it's easy to see the value investment argument for something like handshake: dns is valuable, dns has problems, handshake is trying to solve those problems, by buying hns tokens I'm buying a part of this network, and if they succeed demand for those tokens goes up.

Hope this helps.

[iamspoilt]

Thanks for the input. It does put things into some perspective but I am still wondering.

So something analogous to owning a part of the network, would it be correct to say that, for instance, governments own and auction telecom spectrums to businesses. They do make money out of that ownership through the initial auction price and then potentially tax you later. So a cryptocurrency could be looked at in a similar way in the future. When you later sell the currency you have owned for a while (given that it takes off well over the couple of years), you are basically transferring that "spectrum" ownership to another party.

[aboodman]

That's right. Selling a piece of spectrum is a very good analogy.

Another easy analogy would be IP addresses. Early on in the internet huge chunks were just given out for free. Now they're valuable because they're scarce and the demand for them has skyrocketed as the internet grew.

You need spectrum to participate in the radio business (and other kinds of businesses). You need IP addresses to participate in the internet. Similarly you need HNS (as an example) to participate in the Handshake network.

And as with spectrum and IP addresses, there's only a fixed amount of HNS (or at least that is the expectation, the details vary in each cryptocurrency).

[iamspoilt]

But there is another factor for cryptocurrencies. Anyone can create a new network and do an ICO and as long as the protocol is sound and audited, the new network can still enable money transfers the same way as a Bitcoin network. The collection of networks can potentially never become as scarce as, for instance, IPV4 range or the radio spectrum for telephony in the earlier analogy that I mentioned.

[aboodman]

Anybody could create a new protocol that competes with IP (many did). So that part of your argument doesn't hold.

The reason that IP addresses are scarce is not because it's not possible to invent a new protocol, but because everyone else uses IP so only IP addresses are useful.

Spectrum might initially appear to be fundamentally scarce, but even then, people can invent other ways to communicate (and they did! copper wires! IP!).

These are all examples of networks - their value is proportional to their popularity. So yes, anybody can create a new cryptocurrency, but currencies are mainly valuable because of who you can use them with. Dollars are valuable because so many people accept them!

So if one cryptocurrency really gains traction, it will be hard for any other cryptocurrency to compete unless it offers something fundamentally new and different.

[didibus]

Think of it that way, payment processing is a valuable product, especially online. It's costly and challenging to take money from one person and send it to the other in a secure and trusted way. So companies come along to offer it as a service, like PayPal, Stripe, and you can think of CreditCard companies as well.

So you could imagine yourself investing in those correct?

Alright, now imagine I made an open source software that lets two people process a payment between each other? They can just install the software on their computer, and suddenly they can start transacting money with one another? For free! No need for PayPal or Visa anymore. So what's the catch?

The catch is that software can't actually move real physical money around, that requires trucks and truck drivers and safes, and all that. So it's not possible to move USD dollars with software alone.

What does PayPal do then?

PayPal enters into an agreement with your bank or credit card. When you send me 100$ through PayPal. PayPal and your bank agree that eventually 100$ will be moved from your bank to PayPal's bank account. That is done digitally, and both PayPal and your bank write that down in their system on their own ledger. Now PayPal assumes it will eventually have 100$, and it agrees with my bank to eventually deposit 97$ into my bank account. Similarly PayPal and my bank write that down.

Now eventually money will actually get moved physically, but it'll play catch up. You, me, PayPal, and our banks, we all trust each other, so we assume it will be moved for sure, and so even before that happens you might have sent me some item through the mail in exchange for that money.

Now back to my open source software alternative to PayPal. What if instead of this big dance, and eventual physical exchange of money. What if we made a currency that was fully digital? So when you processed a payment with my software, you arn't exchanging USD dollars, but something I shall call Bitcoin instead. That can easily be exchanged through software alone, no need to actually physically move anything.

Well, there's a few challenge to this. First, since the software is open source and we're each running it (no central service), how can we trust that you removed the amount you gave me from your account? And that I didn't add more than what you gave me to mine? That's where cryptography comes into play.

Okay, so now let's assume I figured out the tech, so my open source software can truly be used to exchange securely and without possible cheating some amount of a digital currency between two parties without any central coordinator. Now we have the problem of how do you get some of that currency in the first place before you can exchange it?

Well, my software also guarantees that there's only 1 million coins of it max. And as the author, I gave myself 100k coins. And I randomly distributed the rest amongst the first thousand users.

Now you were a lucky one, and you have 100 coin if it. So again, maybe I want to buy something from you, but you're in another country. So I tell you, I'll give you 100 of my crypto coin, exchanged through my open source software, and you'll send me by mail my item I buy from you.

Perfect, now we have a way to exchange a currency without having to physically move anything, it is fully handled by software and can be exchanged over the internet only.

So maybe you say, well what can you buy with my coins? Well, you started selling goods in exchange for them? And so did others. So maybe Joe Blo sells Video Games and accepts my coin in exchange for them. And you sell plants. So now you can use my coins to buy video games from Joe and he can use them to buy plants from you. And so on. So the coins are slowly starting to be worth real assets, as more and more people start to accept them in exchange for goods and services they'll be worth more and more.

What's cool about a fully digital currency is that exchanging it is super fast, easy and cheap. It's just really convenient. You might also believe it to be more trust worthy then the agreement between PayPal and our banks, if you think the tech is harder to cheat. And you might believe the software is more stable than some government backed currency at managing inflation. So you might actually find that my software and my currency is overall more convenient, more secure, more safe, and more stable as a currency to exchange and trade in, so maybe you just fully move to it and stop accepting USD in exchange for plants.

Now back to investment. Say you thought that this piece of software was amazing, and you believe that people will slowly stop using other payment processors in favour for it. Well, sell your stock in PayPal cause eventually everyone will move to using my software instead. Now you want a piece of that pie, but I don't sell stock, and I don't sell my software for money, it's free and open source. Except there'd still a way for you to profit from my software gaining in popularity. If you find a way to acquire some of its digital coins, for less than what people will be willing to exchange for them in the future, you can profit from it. Thus it becomes an investment vehicle.

Sorry for the length, hope that explains it though.