[mbesto]

Answer (0 yr crypto dev & veteran):

I start a new coin call $FOO. I release 1,000,000 coins. I sell one coin to a friend for $1,0000, and keep the remaining 999,999 coins for myself. The market cap is now $100M.

> Number of nodes is a poor metric that is easily gamified (pumped up), presenting an artificial picture.

You can game either one.

[throw101010]

Firstly I don't understand who you are "answering" to, the GP didn't talk about Market Cap as a relevant metric.

Secondly, Market Cap is only relevant when reported by popular metrics websites which vet their data sources a little... nobody relevant is listing your coin anywhere, sorry if it disappoints you.

Thirdly, I'm sure that in your first year as a veteran you will learn to care for coins/token which have liquidity/volume either on reputable CEXs or in tokens/networks with a good track record on DEXs.

You can't really game liquidity for long without risking your capital.

I know this is HN, so I would expect less low brow criticism... but who am I kidding this is about cryptocurrencies, rules don't apply.

[mbesto]

> Firstly I don't understand who you are "answering" to, the GP didn't talk about Market Cap as a relevant metric.

No but they were clearly refuting the alternative suggestion (nodes) was game-able. That was my point.

> Market Cap is only relevant when reported by popular metrics websites which vet their data sources a little

> you will learn to care for coins/token which have liquidity/volume either on reputable CEXs or in tokens/networks with a good track record on DEXs.

This is hilarious, because your idea is that:

- It's a popular metrics website

- You believe they are vetted

by a centralized web site, is the exact antithesis of cryptocurrencies. What happened to decentralization?

> You can't really game liquidity for long without risking your capital.

Sure, but why is that relevant here? We're not talking about liquidity as being the relevant metrics, we're talking about market cap.

Market cap is such a hilarious concept for cryptocurrencies because it converts everything to a fiat, which, again, is the antithesis of cryptocurrency.

> I know this is HN, so I would expect less low brow criticism... but who am I kidding this is about cryptocurrencies, rules don't apply.

Meeting low brow comments with low brow comments, chapeau!

[once_inc]

Not OP, but:

> by a centralized web site, is the exact antithesis of cryptocurrencies. What happened to decentralization?

A centralized cryptocurrency is an antithesis. I don't care if any of the products or websites in the surrounding ecosystem are centralized: all I care about is that bitcoin remains decentralized.

Decentralization is a force that limits usefullness. Bitcoin is useful only as a base layer; digital gold that higher layer (more centralized) systems can use to settle down to. Being more centralized offers features Bitcoin doesn't have (high throughput, easy onboarding, etc) at a cost of new risks (counterparty risk, etc). Settling down at the behest of the user allows those users to mitigate that risk, and get the best of both worlds.

[mbesto]

Gold bars are technically "decentralized". No one controls the supply (e.g. there isn't a sovereignty that creates/destroys them), and I can technically just dig them up out of the ground.

[samkon]

You’ve articulated why people call Bitcoin “digital gold”.

[mbesto]

Totally. So what's the advantage of using crypto over a bar of gold then?

[wavefunction]

It doesn't work that way. Market cap depends on circulating coins/tokens. This is an opportunity for you to learn some more though, which is always good!

[NavinF]

> 0 yr crypto dev & veteran

0yr experience with all investments?

> The market cap is now $100M.

Look up "closely-held shares" vs "floating stock" and how free-float market cap is calculated.

Btw your comment has nothing to do with the one you're replying to. Why derail the thread instead of starting your own?

[yarky]

> The market cap is now $100M.

In your dreams only. Good luck finding any serious (aka "smart") money willing to take your valuation seriously. With such due diligence you're likely to be the only one hodling $FOO ;)

[arcticbull]

Thats exactly why market cap is a bad metric - it does not encode market depth (how much you can actually sell before the price moves) or velocity (how many units are changing hands in the wild in a given period).

Worst of all, currencies do not have market caps - equities do. Market caps are measured in currencies.

[mbesto]

Ding ding. You found the point.

[fogof]

This is why I think network fees are a good metric. As long as anyone can become a block creator, you can’t pump it without losing money.

[meltedcapacitor]

Only works on congested networks, or those that burn fees: in original bitcoin style, without congestion, generating dummy transactions is free for miners (the fees come back in block reward).

[mgraczyk]

If there's a public order book, it's very easy to see through this. Harder to do that with nodes.

[SilverBirch]

A public ledger only ensures that you can see through this if you can verify ownershp of wallets, because as we've seen repeatedly, you can programmatically create an entire eco-system of fake wallets trading back and forth. What's the cost? I can trivially create a series of bots that just trade their coins back and forth with each other forever. It'll create huge volumes. Now the reason you don't do this on real chains is because the transaction costs will cripple you. But transaction costs aren't real if the currency you're paying them in was entirely fictional to start with.

From the outside there is no way of verifying that any chain has any real activity without verifying ownership of the wallets.

[mgraczyk]

Your counterargument here only applies when exchanges participate in the scam. Of course that does happen, and for a long time you could even pay OKeX to do this for you. But it's much less common than obscure coins faking volume off-exchange or faking node activity.

[vlovich123]

And yet so many instances of crypto coins that did this. I’m pretty sure they all had public books. The challenge isn’t I sell one coin. It’s wash trading. You create sufficient volume from multiple different anonymous accounts continuously. That’s impossible to decipher because ownership is impossible to untangle.

[mgraczyk]

This only works if the exchange is in on it. That has happened many times but it's much harder to do than faking node activity.

[giaour]

Why does the exchange need to be in on it? If it’s not a KYC exchange, they would have no way of knowing all the Sybil accounts doing the wash trading were being run by the same individual.

[mgraczyk]

Almost all limit order books required posting the assets on the book and take a fee on trades. You can read off the amount paid to generate the fictional market cap and judge for yourself if it's likely to be fake activity. For thinly traded books with low liquidity, it's cheap. For thick books with high volume, it's expensive.

Also exchanges that are not participating in scams, actively or passively, will attempt to detect wash trading and stop it.

[mbesto]

It's much easier to fake the initial activity, then start to have "real" users pile on. The only value I created in my ICO was that I created fake demand and the lemmings followed.

[jkaptur]

Is there a metric that quantifies this? Some sort of market cap * daily liquidity or something?