[smackeyacky]

The author sums up everything that is wrong with crypto in two sentences:

> I was getting excited about every new cryptography protocol, and economics too seemed to me to be part of that broader worldview: it's the mathematical tool for understanding and figuring out how to improve the social world.

No, it isn't. This kind of hubris is what hides what Crypto is, which is a game of greater fools and nothing more.

[roenxi]

Bitcoin has been around for 15 years at this point and there is absolutely no confusion about the technical underpinnings. It has handily survived attempts at government shutdowns in China and serious interest rate hikes. Numerous scams have come, gone and had no impact on hodlers.

At this point it is no longer reasonable to just claim it is a greater fools game without an argument for why. The evidence right now seems to put it in a similar category to gold in that people generally don't like that it has value, but nonetheless value is present.

I also draw people's attention to the parallel with something like a RAID array - it is possible to make robust systems out of unreliable parts. The abundance of scammy and scummy operators in the crypto space is quite consistent with the similar prevalence in traditional finance. The system is robust regardless.

[pinkmuffinere]

I feel the comparison to gold is a bit of a reach. Gold is valuable because:

1. People see it as a store of value

2. It has some useful physical properties

3. People use it as a decoration

Possibly there are other reasons as well, but those are the ones that come immediately to mind. As far as I can tell, Bitcoin only shares attribute #1. It doesn’t have intrinsic properties that make it useful into larger systems (though perhaps we just haven’t found the right systems yet?), and people don’t feel it’s intrinsically valuable. Not to completely bash Bitcoin though — if enough people find it valuable it can become a useful way to exchange value. Right now it’s just pretty bad at that.

[roenxi]

Crypto overall, including Bitcoin, have bunch of intrinsic properties. A lot of people just don't want to recognise them. It puts me in mind of the Sovereign citizen movement, and I expect it'll work just as well for them vs crypto as it did for the SovCits vs the US government.

* Can only pull new bitcoin into existence by paying a hefty market-determined price.

* Can transfer them iff you know a certain secret.

* Can verify that a certain number of bitcoin are linked to a specific secret.

* Can technically transfer bitcoin without approval from a legally blessed 3rd party

There is no asset outside of crypto with those properties. Turns out that combination is worth, so far, billions. Probably more as it settles in and people get used to the idea. Will Bitcoin last forever like gold? No. Will it last long enough? Looks like it. Is crypto valuable? Judgement is in, market says yes.

[bemusedthrow75]

I also think Bitcoin and crypto generally have a lot in common with the sovereign citizen movement. But I think where you and I differ is that I think that’s a uniformly bad thing.

[therobots927]

It's much easier to transfer bitcoin than it is to transfer gold, so not only does it share #1, it has additional attributes than what you listed.

It already is a useful way to exchange value, people do it all the time.

[koonsolo]

You can literally store it in your mind. A lot of people buy gold for when "Shit hits the fan". But in the end, it's better to flee a horrible place (think Russia or Hong Kong) with a bottle of water and $1M worth of bitcoin stored in your head.

[Our_Benefactors]

> You can literally store it in your mind

People love to say this, but frankly it is so unrealistic as to border on untrue. It’s a lot to remember. And you can’t transact with “your head” alone, you still need to interface with a computer of sorts; in the event you’re fleeing it’s probably not so easy to purchase a hardware wallet or download the TB-scale blockchain.

[koonsolo]

> but frankly it is so unrealistic as to border on untrue. It’s a lot to remember.

12 words is enough. For example: witch collapse practice feed shame open despair creek road again ice least. If you can make a story that incorporates those words, it's even easier to remember.

> you still need to interface with a computer of sorts

You flee a nasty place towards a nice place. Nice places have computers and internet.

[bemusedthrow75]

Is this really the case?

Don't most people who invest in gold use ETCs/ETFs, certificates etc.?

I don't think gold trading is significantly far off instantaneous, at this point, and it's probably easier to cash out.

[badpun]

This just means it's technically sound gizmo. It's central purpose is still speculation though, which is rooted in the greater fool theory.

[nicbou]

But as a currency it’s still mostly useless.

[smackeyacky]

Every single one of these shit coins had a bunch of founders that mined all the profit out of it on day one. Everybody else is a sucker, bitcoin included.

The underlying model is corrupt and nakedly stupid.

[zamfi]

…did you read the rest of it? I recommend it. (And I’m far from a crypto-optimist.)

[underlipton]

No, that quote is correct. Let me restate it in a way that may appeal more to pessimists:

Money is a form of mind control. You use money to get people, groups, institutions, to do what they normally wouldn't. Economics is the study of manipulating that power.

Cryptocurrencies would then be, or was supposed to be, about radically resetting economic priorities, in part by washing away the old incentives (by cutting the institutions that perpetuated them out of the money->behavior loop). It actually did manage this, to a limited and chagrin-inducing extent: 2-3 years ago, you could have convinced someone to pony up 2 year's worth of the average American's income for a picture of a cartoon monkey. Even today, people are paying "money" for digital art that they never would have a decade ago. The potential to have people value things differently because the means underlying that valuation had changed was there.

The issue, to my eye, is that the traditional financial "megaliths" (as he put it) sunk their claws in, with people on the inside ready to sell out the space to become filthy rich (only to be betrayed, both by their own hubris and the incumbent power structures). This is where your "game of greater fools" comes into play, as well as the oft-noted notion that Capitalism subsumes and commodifies everything it can.

[tomrod]

> Economics is the study of manipulating that power.

Hello! Your friendly neighborhood economist here. Economics is the study of resource allocation under scarcity.

In your comment, I think you actually mean Game Theory and Mechanism Design, which are about assessing strategic behavior (Game Theory) and about creating mechanisms that align with strategic behavior to result in preferred outcomes (Mechanism Design, sort of the opposite approach to Game Theory).

Alternatively, based on your comment here:

> The potential to have people value things differently because the means underlying that valuation had changed was there.

you might find your thoughts more appropriately align to sociology and social psychology than economics, as economics doesn't care where your valuation or preferences come from--just that you have them.

Up, up, and away!

[underlipton]

If I'm wrong on this subject (and I would be interested in knowing how "resource allocation under scarcity" and "manipulation of the behavior of the people obtaining and using resources" are mutually exclusive), I might say that it's a product of the layman's (my) relationship to "economics" and "economists". The contact the most people have with economists is usually, "Talking heads or disembodied voices telling listeners how they should feel about developments in various markets that are connected to whether or not they'll be able to find their lifestyle affordable." The emphasis is decidedly on application, which I imagine runs into game theory and mechanism design, to the point where a reasonable observer might consider the latter two components of (applied?) economics. ...Which raises the question: DOES anyone subscribe to this model? What would an expert make of it?

>you might find your thoughts more appropriately align to sociology and social psychology than economics

Since economics is an emergent property of agents interacting with other agents and their environment, I'm failing to see how I'm misaligned with any of the three. I've heard economics described as "sociology with a veneer of statistics", which is something I can't say I'm unconvinced by. I respect your status as a relative expert, and also as someone close enough to the subject to have a conflict of interest in characterizing it fairly.

[MrVandemar]

> Hello! Your friendly neighborhood economist here. Economics is the study of resource allocation under scarcity.

As an economist, would you be able to explain (because I truely do not understand) why "the study of resource allocation under scarcity" is more important than (and/or prevents) meaningful action on climate change?

[jncfhnb]

Because meaningful action on climate change requires the allocation of scarce resources?

[tomrod]

> As an economist, would you be able to explain (because I truely do not understand) why "the study of resource allocation under scarcity" is more important than (and/or prevents) meaningful action on climate change?

For my case, it is quite simple -- people have different preferences and switching costs! I chose economics as a field of profession because I felt it explained human behavior much better than anything I'd come across in my life at the ripe old age of 21. Had I started my studies less than two decades ago, I would have invested more in physical sciences (especially hydrological saline exchange and improving soil quality through mycology, both fascinating problems some of my close friends study). This said, my data science company was founded two years ago to focus on impact problems in health, technology, and geopolitics, all of which are becoming more and more impacted by the effects of anthropogenic climate change in addition to just out and out pollution and bad policy effects.

But I think your first question is less why I personally studied computational economics and industrial organization, and more why economics exists when humanity may be facing a global extinction at worst and a loss of living standard at best. And the answer is: economics can be used to help with mitigation (and economists have been calling for effectual policy to address climate change for _decades_ through known effective policies like carbon markets, see subfields that research environmental economics and public economics).

Now, economics can also help understand why we see little meaningful action. Rational people (defined as being able to make comparisons between options presented to them, which simplifies analysis without much loss of generality to cases like bounded rationality) do not choose what is best for a collective (personal happiness/utility) nor what is best for them tomorrow (time inconsistency of preferences) when neither of those have meaningful impact to them today or in the near term. You see this all the time in the startup world and in the corporate world among VCs and executives who are only in things to accomplish short term goals. Self-organizing collective action is _hard_ to generate or maintain without enforcement of some kind.

To explain with a workhorse model regarding collective versus individual action, you can reference the stag hunt game: https://en.wikipedia.org/wiki/Stag_hunt. In short, while two individuals engaging for collective action will benefit more in total, there may be incentives to deviate from a collective strategy. People want more _now_, not 75 years from now (beyond the lifetime of the current living).

So TL;DR:

1. Preferences! Or, rather, subjective valuations of research topics by people can vary without applying presentism to near history

2. Because economics can explain failures in collective action, but it doesn't control or recommend against collective action goals. In fact, qualitative economic approaches to policy are often highly successful. So the gap on meaningful action is more related to political will and the incentive to deviate or adopt a policy that isn't Pareto improving.

[MrVandemar]

Thank you. Very digestible. And depressing.

[tomrod]

Only to an optimists first challenge. In truth, there are a huge array of tools that work pretty well. Definitely a space to explore, especially for folks that want to make the world a better place.

[Dalewyn]

Put another way, money is a method for purchasing time.

We pay money to use other people's time, and we sell our time to get paychecks.

Remember the old saying: Time is money.

[tomrod]

Close. We pay money to use other people's times _and_ resources (capital) and outputs (widgets). Take Netflix. You watching a whole lot of Netflix for $400 a month (or whatever they are charging these days) doesn't make people work any differently than paying for it and not watching it, or, truth be told, not paying for it (as an individual), or, in the rare case, watching it without paying for it. Thanks to the magic of capital! You're paying Netflix for Video Content and Delivery systems, but their system exists and would probably work for a long time if they reduced staff significantly. (I'm not advocating Netflix fire people).

In short, we pay people both for their time, purchasing of objects, and for use of their assets (without commenting how how fair or unfair their capital acquisition practice was to this point).

[000ooo000]

>Close. We pay money to use other people's times _and_ resources (capital) and outputs (widgets)

If these other things still require time as an input to create them, isn't it still just time at the end of the day?

[tomrod]

With a really indirect definition, yes! But then, the cost per unit sold for the latest Taylor Swift album through Apple Music is basically free, so much so that the marginal amount of time to produce and sell it is extremely negligible.

[trompetenaccoun]

Money is a means of exchange or unit of account that in its essence represents real value, such as your labor. It can be used much more like physical shackles than mind control. Because people need to eat, people need housing, that's not an illusion. And money isn't inherently bad, the mind control is in the part where they convinced a majority that it's ok for them to keep the key to everyone's shackles.

In the end all the ways Bitcoiners thought the system would come after them never happened. Ironically they got exactly what they wished for and what critics thought could never happen. Because the establishment has a much easier way to suffocate emerging uprisings: Buying off the leaders and incorporating the movement into the mainstream. Crypto has gotten assimilated.

[mkatx]

Inherently so, it is not.

But nice try to lower your buy in price.. ;)

[dartos]

I’m not against crypto as a technology, but as a financial tool, how is it not a greater fools game?

Broadly speaking, you can’t live on crypto alone. Most people aren’t able to buy food and shelter with it.

So the goal, in those majority of cases, is to buy in low for the exact purpose of waiting for a “greater fool” to purchase it from you for more.

[eaurouge]

> Broadly speaking, you can’t live on commodities alone. Most people aren’t able to buy food and shelter with it.

> So the goal, in those majority of cases, is to buy in low for the exact purpose of waiting for a “greater fool” to purchase it from you for more.

Feel free to substitute with your preferred non-monetary asset.

[dartos]

Not _any_. I can live in a house while it appreciates.

I can take dividends (in dollars) from certain stocks.

But not crypto (or non dividend stocks)

I’d argue that stocks without dividends are also a greater fool’s game.

But back to the original point, so you agree that crypto is a greater fools game, financially.

[tough]

there's plenty of offramps and onramps from crypto to trad finance.

You can earn your money on crypto, get a debit card, and pay for your food and rent with it.

I've done it.

[dartos]

Sure, but that’s my point exactly.

You need an offramp.

The only offramp is someone else (or some exchange) buying your crypto.

They would be the “greater fool” in this case.

Even if you earn crypto, that crypto came from a “lesser fool.”

You’re just the intermediary.

[fbrusch]

ether, Ethereum's native token, is required to pay for computation on a computer with peculiar properties (publicly visible, unmodifiable, unstoppable code, uncensorable interaction). If somebody finds that useful, he will need ethers, and you will be able to sell them yours. How would he be a (greater) fool?

[dartos]

This is true in the case of chains that have vms built in, (Not bitcoin, Monero, meme shitcoins) but being “gas” for vms isn’t “inherent” to crypto.

On a kind unrelated note, are there any compelling dapps on eth that aren’t financial tools?

When I was playing around with web3 and dapps in 2020 it seemed like the only dapps around were banking protocols and gambling.

[eaurouge]

> Sure, but that’s my point exactly.

> You need an offramp.

> The only offramp is someone else (or some exchange) buying your stocks.

> They would be the “greater fool” in this case.

> Even if you earn stocks, that stock came from a “lesser fool.”

> You’re just the intermediary.

[LegionMammal978]

> The only offramp is someone else (or some exchange) buying your stocks.

So dividends, buybacks, and takeovers don't exist?

[dartos]

FYI saying that someone else is also a greater fools game, doesn’t do anything to show that crypto isn’t.

[tough]

> Sure, but that’s my point exactly. > You need an offramp.

> The only offramp is someone else (or some exchange) buying your fiat.

> They would be the “greater fool” in this case.

> Even if you earn stocks, that stock came from a “lesser fool.”

> You’re just the intermediary.

[mkatx]

No one buys stocks for the hell of it, it is 100% a financial instrument used to profit by the buyer and the seller. If you couldn't sell to someone for a higher price, no one would buy them. If that's your bar, then cryptocurrencies are as legit as stocks as far as a financial tool is concerned. Stocks may arguably have more utility, but for the buyers/sellers, they aren't much more that a speculation instrument.

If someone will take Pokemon cards for a pizza, or a house, whatever, then it has some utility. If someone collects pokemon cards, and has enough for a house, they might (probably) need to exchange them for some real currency to complete that transaction. But pokemon cards are not inherently a scam.. just because the price can go up and down.. they are probably considered a collectable.

Now cryptocurrencies are not collectibles, and they are not currencies, but they have attributes of both I'd propose. They are entirely speculatory in nature, but can sometimes be used as a currency. So, in some ways, I argue, they should be treated like pokemon cards, in other ways, regarding regulation, they might need to be considered a currency to be able to regulate the industry in such a way that protects investors, just like private transactions (selling collectibles) and financial investing (trading stocks/etc) have regulations.

Although this is nuanced, and cryptocurrency is not currency or a collectible entirely, it is not inherently a 'greaters fools game' any more than trading stocks or Pokemon cards.

It's just another thing that needs to be regulated, and if people didn't use it for something, it would just go away, and we wouldn't be having this discussion.

[dartos]

So then crypto, as a financial asset, is a greater fool’s game.

OP said it’s inherently not, which is what I was arguing against.

[mkatx]

On another note, there is a lot of fud on cryptocurrency right now.. and let me say this.. there are farms of individuals, soon to be llm's, flooding the Internet with all this negativity on crypto in every conceivable public forum.

100%, this is politics now, when you see people online with a certain perspective, you tend to at least consider it. This is the psychology of influence on the net, everyone's brains are connected to this same network, and business and government know it. If they can even suggest that individuals give any credence to a random post online, they will make that post, and to their ends. So now, we have entire buildings of people filling the net with their 'opinions', in the name of influencing.

There are so many 'people' online that totally call cryptocurrency an inherit scam (which is pretty much impossible, inherently so, that the idea is itself a scam, and not just able to be used to scam.. cmon, the distinction is there), that I'm convinced that many of the anticrypto posts are simple persuasion,because either the riches want to buy in, or they are scared of what it can do (as far as replacing the status quo).

Now I'm sure I'm that crazy internet crypto dude all of a sudden, but listen closely, cause we will all see in the next decade or two, and neither you nor me know the future. Remember me either way. :)

[spankalee]

I think crypto is inherently a scam - a distributed pyramid scheme. Am I now "people" with "opinions"?

[mkatx]

But seriously, there are 1000's of cryptocurencies, you can't logic the possibility that even one was built with 'non-scammy' intentions? Cause 1 is all it takes to refute that 'ceyotocurrencies are inherently a scam'.

I'm sure your being vacecious, but there are those that would comment that seriously.

[spankalee]

Yes, I think digital scarcity is a scam.

But that's not really the point. You seem to think that I can't really exist and any "person" with such an "opinion" is a part of a propaganda operation or trying somehow to artificially lower the price (with a post!) to buy in.

Can you accept that real people think crypto is a scam?

[daveguy]

Whether a crypto is built with non-scammy intentions has little bearing on whether it is used as the vehicle for scams. And a permanent, uncorrectable ledger as the sole truth of transfer of funds is perfect for scams.

[dartos]

I’m sure that somewhere in crypto land there are people really trying to show the good crypto can bring.

I’m sure a fair amount of them get screwed over by bad actors.

But it’s undeniable that the most successful strategy (at least in terms of gaining popularity) is making a pyramid scheme, but automated.

That may say something more about humans than crypto, but it is what it is.

[mkatx]

Fo sho, yes.

Also, I like how you trim your front sail (cut if your jib), we should be friends.

Edit: autocorrect

[mkatx]

You know, I'm trying to have honest, intelligent discussion, care to explain why I deserved a down vote?

If you disagree, comment!! Let's discuss!

I guess I apologize for the little joke at the end if that's the problem.. sorry everyone!

Also, sorry for my opinion! Darn, it does just happen to be contrary to some of y'all's, I'll be more careful!!