[CivBase]

This is oversimplifying, but stocks are essentially purchasing a stake in ownership of the company. The company uses that money to advance its mission - ideally generating more profits which are shared with the stockholders (dividends). It's that stake in ownership and expected dividends that give stocks inherent value.

There is no company behind crypto currencies that holders get ownership of. There is no product or service to drive profits. There are no dividends, voting power, or anything that gives inherent value to the coins. It's all pure speculation. Just money getting shifted around among the holders - with exchanges taking a cut off the top of each transaction.

[fragmede]

I'm sorry, but what am going to do with my Class C shares of Google which have no voting rights? They also haven't paid dividends. My buying of them didn't give Google any money, either. My infinitesimal ownership in Google doesn't get anything other than it's a number in a database somewhere that hopefully goes up. There's underlying assets there, sure, but as we've seen with GME, TSLA, and now NVDA, it's all just vibes.

In this case though, FTX had their own token FTT that gave people that owned it voting rights in FTX and "staking rewards" aka dividends. It's not worth anything today due to the fraud that SBF perpetrated, but that sure smells a awful lot like a stock to me.

[hgomersall]

Right. There seems to be a real aversion to accepting that trading shares is really just middle class gambling.

[ryan_lane]

Long-term investors are buying more stocks at a lower price, with the idea that at some point the company may eventually pay dividends that justify the price of the stock, at which point they get more share of the dividend profits. Folks who purchase these stocks after this point would base the value on the value of the dividends.

Day traders are gamblers.

Cryptocurrencies will _never_ pay dividends, because they are based purely on speculation. These things are absolutely not the same. Cryptocurrencies only provide gambling.

[fragmede]

In what way is staking not basically paying dividends?

[ryan_lane]

Because it also requires validating transactions. You're providing collateral to be trusted to perform a service, for which you're paid.

[fragmede]

It does? All I did was click a button on Coinbase, and I get like 5.1% APR.

(Or I did until the SEC said they weren't allowed to do that anymore because they didn't give me enough disclaimer that they might lose my money.)

[methodical]

Stocks are not completely nondeterministic games of chance, which is why most people who hold properly diversified stock portfolios have seen long-term growth instead of loss. That's probably why people don't call it gambling.

[Zpalmtree]

Crypto is not a completely nondeterministic game of chance either. There are people in crypto who are consistently profitable.

[methodical]

Who in crypto is consistently profitable?

[kelnos]

> Stocks are not completely nondeterministic games of chance

That's a bit of a straw man, as no one claimed they are. "Gambling" is often not a nondeterministic game of chance, either. For example, when I go to a casino and play poker, I'm still gambling, even though there's plenty of determinism and strategy to go along with the elements of chance.

[Fargren]

>>My buying of them didn't give Google any money, either.

You buying the stock raised the price of the stock. Google uses the stock as compensation. The higher the price, the easier they can hire, and the less cash they need to offer to employees while still being attractive.

[gambiting]

>>My buying of them didn't give Google any money, either.

really? how can that be true?

[fragmede]

Yes. Read up on how it all works, or ask an LLM about it.

[gambiting]

...is explaining it here too much of an effort, or what? Like I don't mean to be rude, but that really doesn't strike me as an unreasonable question to ask.

[fragmede]

I don't know what you do and don't know, and what misunderstandings you're operating under, and threaded forums really aren't set up for the kind of back and forth it would take to do a proper calibration so as to give an appropriate answer that is at the right level of explain-y, and not mansplain-y/condescending. But what the hell, I'm waiting on a build (rust).

Companies IPO and sell shares. The company gets paid by people who want to own shares. The company IPOs and sells 1000 shares at $50 each, gaining them $50k which they can then use to buy a new whatever. Then, in a market like NYSE, other people can buy and sell stock. If I think the stock is undervalued I offer to buy 1 from someone at $55. that person gives me 1 stock, I give them $55, netting them $5. The company is not involved in this transaction and does not get anything from that specific transaction.

Now that the price is at $55, the company could decide to sell additional stock, now at $55 instead of $50, but that's a separate event from the transaction that happened previously. So the company does benefit from the stock price being high, but not directly off each transaction.

I've omitted all the details, but I think that's enough to get the gist of it.

[kelnos]

When you go to your brokerage account and buy a share of Google, you aren't buying it from Google, you're buying it from some other random shareholder out there who wants to sell. Google does not see a cent of that money.

In general, the only times a company gets money when you buy shares are if you participate in an IPO, or if an already-public company decides to offer more shares for sale in order to raise some money, and you buy some of those shares. (There are exceptions, but retail investors like you and me usually don't get invited to participate in those deals, though.) The vast majority of shares that trade hands on the markets every day are not owned by the company whose name is next to the ticker symbol.

[mlrtime]

Read up on Capital Markets (Stocks / Bonds). Ways for companies to raise money.

HN/VC is NOT the traditional way for companies to raise money.

Buying outside a IPO is called the secondary market. If nobody could buy a share in the secondary market, the stock is almost worthless. Just like your private company with one round of funding and shares. If you can't sell them, they aren't worth much.

[hcks]

Why would someone sell the share for less than this "inherent" value then? Or conversely why would some buy for more than that?

[jjav]

> Why would someone sell the share for less than this "inherent" value then?

Because the inherent value includes things we know about such as the assets the company has, but it also includes the speculative future earnings which we can't be sure about.

[kelnos]

Because people don't always agree on what that value is. Information is never perfect.

And sometimes some people just need the cash, and are willing to sell at a discount.

[gambiting]

They don't though? Share buy/sale price is directly correlated to the value of the company.

[shinryuu]

Which changes depending on how many buy the stocks. Was gamestop really worth billions at the top of the mania?

[acdha]

The market cap of its stock might but if you looked at the financial press during that episode it was full of people pointing out that there was no change in the fundamental value of the company. That’s because real businesses have things like sales volume, profit margins, property rights, etc. which aren’t entirely arbitrary and dampen the swings considerably. That’s not perfect or immune to abuse as Boeing shareholders are no doubt aware but it’s very different from something which has no grounding beyond momentary social consensus.

[shinryuu]

While I agree that there is a lot of hot air in crypto, what gives value to something like ethereum is the fact that you need it to use the network. Given people think it's useful to use that network it will give value to ether.

[acdha]

That does add some value but it’s fairly weak - people can always choose to switch to something cheaper, capping the maximum - and it adds its own risks: price spikes might leave you unable to perform transactions within your budget.

[kelnos]

Likely not, but it's a little weird to point to outliers as counterexamples to how things generally work.

[fragmede]

the outlier is being used to point out that the system works on ~vibes~, and to illustrate how silly and shitty of a system we have.

[kelnos]

> This is oversimplifying

Yes, and in doing so you've managed to blissfully ignore all the speculation and outright gambling that goes on in the stock market.

I'm not a crypto defender; I think it's mostly useless and a waste of people's time and money. But let's not paint a big rosy picture of the rest of our financial system. That's just not where the truth lies.

[CivBase]

I did no such thing. I only answered the question I was asked. For some reason a bunch of people interpreted that as a defense of short-term stock trading.