[Waterluvian]

That’s the thing I can’t ever come to understand about crypto. It’s purely about perception of value. At least with some precious metal, it has a floor value as a function of its practical uses and abundance.

Which leads me to believe that the only thing that could be honestly said is that a crypto is purely about winners and suckers and timing.

[tenthirtyam]

> At least with some precious metal, it has a floor value as a function of its practical uses and abundance.

I don't really give this argument much credence any more. If the value of, say, gold or diamonds were to drop their practical-use-floor-value, they'd be valued at probably less than 1% (maybe much less) of current value. I mean, how much gold is actually consumed by industry? And we even have industrial diamonds now.

A friend argued to me that crypto is "A Terrible Thing" because its just used to fuel the (illegal) narcotics industry. At this point, I'm doubting that too - the market cap of all crpyto, and the value being transacted e.g. daily volume, has increased massively recently. Are we to believe that narcotics have caused that? I can't imagine so - more likely to me it's around 90-99% speculation which, you might well argue, is "Another Terrible Thing."

[wat10000]

I think the main thing precious metals have going for them is tradition. That’s no small thing. They’ve been considered valuable for millennia, and that’s likely to continue. Bitcoin might be replaced by some other fad in a decade.

It’s like if you’re betting on a religion, Christianity is more likely to last than Scientology. They might both be equally made up, but one has demonstrated staying power.

[flakeoil]

It's of course not the criminal use of crypto that has caused the price to increase so much lately, but the use of it for criminal activity is one of its main real use cases (apart from speculation which is not a real use case).

[Cthulhu_]

> I mean, how much gold is actually consumed by industry?

[0] indicates there's a demand of about 5000 tonnes of gold per year, with about 560 tonnes going into technology and electronics (the vast majority still going to jewellery). The total amount of gold in the world is about 212.500 tonnes according to [1], which is a cube of only 22x22 meters. [2] says about 3600 tonnes are mined per year and about 1200 tonnes is recycled/reused.

[0] https://www.gold.org/goldhub/research/gold-demand-trends/gol...

[1] https://www.gold.org/goldhub/data/how-much-gold

[2] https://www.gold.org/goldhub/research/gold-demand-trends/gol...

[rasmus-kirk]

> A friend argued to me that crypto is "A Terrible Thing" because its just used to fuel the (illegal) narcotics industry.

That's a good thing, though.

Jokes aside, as a person who loves crypto technologically and agrees with the more cipherpunk roots of bitcoin, I have not seen anyone serious use crypto for anything other than drugs or small transactions, just for the sake of it. People usually just seems to hoard the stuff, which is incredibly stupid since the main value proposition of crypto is being able to transact it. I almost respect the people buying drugs with it more, since they at least use cryptocurrency, rather than just speculating in its value to fuel their gambling addiction.

[tenthirtyam]

> a person who loves crypto technologically and agrees with the more cipherpunk roots of bitcoin

Yep, that'd be me too. What gets my blood pressure rising is the sheer amount of coins & tokens available now all of which, bar perhaps a tiny fraction, seem to have no value proposition other than "number go up". To me, NFTs are the nadir of this concept. I struggle to imagine a legitimate use case for any crypto that doesn't involve rapid, frictionless transacting.

For example, there are a couple of fantastic services, like "Cauldron DEX" or "BCHBull" (no affiliation) - smart contracts which allow for trustless swapping of tokens. The concept is genius and the execution here seems very good (to me, non cryptographer) but, again, what can I do with these tokens or coins I've traded except trade them later for some other token or coin?

BCHBull seems to allow exposure to commodities and some fiat currencies - that makes it comparable I suppose to actual currency or commodity speculation which has been going on for centuries. One might still argue "what can I do with all this gold except trade it later for oil?" but, well, that seems to be a weaker criticism.

[buu700]

Agreed, but unironically. US tobacco consumption is at a historic low, while people are dying from an opioid epidemic and fentanyl contamination, and somehow the War on Drugs is nearly unquestioned as good policy? Prosecuting people for making poor health choices is such an extreme and frankly insane idea.

Let's go back to selling Bayer Heroin™ at pharmacies, with sensible regulations. That would better position us to minimize narcotic use over the long term, while also making it safer, and defunding the cartels while we're at it. In the meantime, if someone is going to do drugs, I'm all for them using cryptocurrency to make the process as safe as it can be given the circumstances.

[amluto]

The actual market value of diamonds is pretty low. You can pay a jeweler a lot of money for a shiny diamond, but good luck reselling it for a similar amount of money.

Gold, OTOH, is fungible. You can melt it, mold it into different shapes bars, resell it, etc.

[jajko]

With diamond jewelry, you pay mostly for the manual work of jeweler since folks don't go to jewelry shops to buy a diamond stone alone. If we talk about gold bars, no sophisticated manual work involved, just pouring molten gold into some mold on semi-industrial automated scale.

If you buy sophisticated golden jewelry, you also pay ton for work that nobody else may appreciate. Sure you can get it smelted into something else, but you burn most of the original value, and some more on the change itself.

[spiritplumber]

Diamond value went through the window already (as it should), if gold came down to use value, we'd see it used more for electronics and electrochemistry.

[XorNot]

I mean, this is all true which is why we have fiat currencies.

The UK government has consistently honoured debt for longer then the US has existed, for example.

[nine_k]

Inflation, and especially controlled inflation, is much easier with fiat money. Most governments see it as an extremely valuable tool.

[lesuorac]

> A friend argued to me that crypto is "A Terrible Thing" because its just used to fuel the (illegal) narcotics industry.

My general argument against this is that Ransomware _predates_ Crypto.

There's also the whole Regan airlifted Iran literal USD for helping him win a presidential election so you don't need crypto for scummy behavior.

[henry_bone]

That's true of everything we use as money, including precious metals. You can't eat them, live in them, use them as weapons, walk down the street in them. They have value bacause we all agree that they do and we all agree to use them as a means to exchange that value. Also, and this is important and I should have said it first, they have value because their supply is restricted.

The same is true for crypto. It's fungible, private, and limited in supply. It's also independent of governments although they are doing their level best to correct that.

[Terr_]

> That's true of everything we use as money, including precious metals.

To exploit this chance for quote Terry Pratchett, on a book that does happen to be about currency and banking:

> ‘The world is full of things worth more than gold. But we dig the damn stuff up and then bury it in a different hole. Where’s the sense in that? What are we, magpies? Is it all about the gleam? Good heavens, potatoes are worth more than gold!’

> ‘Surely not!’

> ‘If you were shipwrecked on a desert island, what would you prefer, a bag of potatoes or a bag of gold?’

> ‘Yes, but a desert island isn’t [the city of] Ankh-Morpork!’

> ‘And that proves gold is only valuable because we agree it is, right? It’s just a dream. But a potato is always worth a potato, anywhere. A knob of butter and a pinch of salt and you’ve got a meal, anywhere. Bury gold in the ground and you’ll be worrying about thieves for ever. Bury a potato and in due season you could be looking at a dividend of a thousand per cent.’

-- Making Money by Terry Pratchett

[solatic]

Government fiat currencies have fundamental value because their taxes are denominated in their fiat currency, while their fiat currency is used to compensate the public sector for their labor. If you, as a private citizen, want to avoid the consequences of not paying your taxes (e.g. prison), you best find a way to get your hands on some of the fiat currency that has entered the economy via the public sector workers.

For a cryptocoin to have fundamental value, someone must be willing to accept it as payment. The only entities willing to do so currently are criminal enterprises and perhaps the El Salvadoran government (to pay taxes). All the other uses (like cross-border payments) rely on speculators on both ends providing liquidity for the exchange to fiat currency.

[pandaman]

It's mostly correct except it's just the governments that agree to take gold and silver to settle debts (no, going off "gold standard" did not change this, gold and silver are still accepted as bank reserves around the world). And governments have the power to take your property to settle your debts with them. So for anyone, who is a subject of a government assigned debt (via taxation usually), gold has very practical value as it allows to keep one's property.

The same is not generally true for crypto, perhaps in El Salvador they really take crypto to settle taxes but in any other country crypto only has value because of speculators.

[ninalanyon]

> the governments that agree to take gold and silver to settle debts (no, going off "gold standard" did not change this, gold and silver are still accepted as bank reserves around the world)

Really? Can you point us, or perhaps just me, to something that explains that and which countries this applies to? I think that I'd have a hard time paying the Norwegian tax authorities with gold or silver. In fact even paying them in cash would be difficult.

[pandaman]

>Can you point us, or perhaps just me, to something that explains that and which countries this applies to?

Gladly https://www.efginternational.com/us/insights/2021/gold-and-b...

>I think that I'd have a hard time paying the Norwegian tax authorities with gold or silver.

This might be even true since Norway is not in EU but I would be surprised if Norwegian banking had been that different from Basel system.

[losteric]

What are you talking about? We can wear gold, make weapons out of iron, cups out of copper… coins have both a fiat face value and real tangible value (the “floor”).

Bitcoin has no intrinsic value. It’s entirely belief.

That’s not a bad thing. MLMs can be very profitable, some turn into multi-generational institutions of faith.

I own bitcoin because it’s like buying a share of the Mormon church early on. Absolutely, do it! But comparing it with gold? Come on, be real.

[sgregnt]

Bitcoin physical value is that, one way or the other, billions of humans got atoms in their brains, arrange in such a way that they recognize bitcoins, and have a certain understanding of it's setup... this is a lot of atoms, and is no small fit.

[losteric]

You're describing the belief value.

[PeterStuer]

And fiat currency isn't purely about perception of value?

Just as not all crypto is equal, the Zimbabwean dollar isn't remotely like the Swiss frank, just as bitcoin isn't remotely like hawktua.

[IsTom]

If nothing else, when the time to pay tax comes, you'll find yourself in need of some fiat if you want to stay out of the trouble.

[pessimizer]

> And fiat currency isn't purely about perception of value?

Of course not. I don't know the laws of the country you live in, but in the US, the dollar is always acceptable as the payment of a court judgement and for the payment of taxes. That's not perception of value, that's value.

All money is just IOUs, but getting an IOU from your landlord is different than getting an IOU from a stranger. You will have to pay your landlord in the future, or the landlord will send someone to physically throw you into the streets, and might be given license from the government to just take arbitrary possessions from you. An IOU from the landlord will automatically offset that.

When you get IOUs from entities you don't have a ongoing financial relationship with, you need buyers who either 1) have an ongoing relationship with or are willing and able to transact with that entity, or 2) trust that they can find someone who has a relationship with that entity who will buy the IOU.

1) is value, 2) is the perception of value. Crypto has 3), in which there is no entity issuing or accepting the currency against a real debt (such as taxes or legal liabilities, which if not paid result in men in uniform hitting you with sticks, chaining you up, and locking you in a room), and no place to dump the currency other than other speculators.

You can find people who believe in bitcoin, so bitcoin is liquid. But bitcoin support relies on a constant and enormous amount of marketing and lobbying, in the exact same way as "hawktwa." Crypto (thus far) only has value in that it can aid in criminal transactions (semi-privacy), and that enough wealthy people own it that they're now convincing weak governments to subsidize it. Dodging law enforcement and government handouts to the wealthy on one hand; maintaining preexisting legal obligations and paying taxes already owed on the other. Both fiat and crypto rely on government, but crypto is government subverting itself. Crypto only has value to the degree that governments allow or encourage lawbreaking and corruption. Crypto (as it is, not a hypothetically) is parasitic.

> Zimbabwean dollar isn't remotely like the Swiss frank

The Zim dollar is exactly like the Swiss franc, except it's harder to find people who pay Zim taxes and court judgements than people who pay Swiss taxes and court judgements. Just as hawktwa is exactly like bitcoin, except they lack the lobbyists, and the marketing is focused around a viral youtube clip. The big difference between the two classes is that you don't have to be convinced that government fiat is worth something, you know it is. The reach of crypto, outside of fraud and government graft (which is real value) is simply the reach of crypto marketing.

[fsflover]

> The reach of crypto, outside of fraud and government graft (which is real value) is simply the reach of crypto marketing.

Except when your government is not trustable and you have to find a way to store and transfer value in an independent and anonymous way.

[saalweachter]

The tricky part is there is a difference between "your government is not trustable" and "you don't trust your government" that you can never bridge.

[fsflover]

Why does it matter here?

[saalweachter]

Moving your money into a non-local currency or store-of-value has a cost and its own risks.

If you trust an untrustable government, you lose when they betray you. If you don't trust a trustable government, you lose when you spend years and decades hedging against their betrayal and it never comes.

[halfcat]

> It’s purely about perception of value

All money has always been about perception, whether we used paper, shiny rocks, or sea shells as money, it’s always been about perception. Is it real or counterfeit, do you trust the person you’re transacting with, are enough people you know using it, and will people with weapons show up to protect your money if someone else tries to steal it?

The “people with weapons” part turns out to be a key component. The novel thing about crypto is that you are less reliant on the “people with weapons” to protect you and tell you what you’re allowed to do with your money, and more reliant on the “people with encryption”.

[wordpad25]

No.

Fiat is backed by tax base. US has more assets than debt. Additionally US is the largest economy in the world, how much would the right to tax it be worth? A lot.

It's not at all just perception and influence as you claim.

[abdullahkhalids]

US economy has been second largest for over 10 years now [1].

[1] https://ourworldindata.org/grapher/gdp-maddison-project-data...

[signatoremo]

Huh, the paper cites World Bank, but WB themselves report differently:

https://data.worldbank.org/indicator/NY.GDP.MKTP.CD

Any other official sources would tell you that US is the largest economy in the world by GDP, which is the most commonly accepted metric.

[malfist]

I don't know where that site is pulling their data from, but not even the Chinese government claims their GDP is as high as that. And our GDP is higher than that site claims

[Detrytus]

This is Purchase Power Parity GDP (as indicated by the subtitle "This data is adjusted for inflation and differences in the cost of living between countries.")

[AnthonyMouse]

> Fiat is backed by tax base.

The general form of this is, it's backed by something that will accept it as payment. But then the same is true of non-fiat currencies.

The value of a currency is simply, what can you get when you spend it?

[macinjosh]

So hyperinflation only happens when the tax base disappears? Perception and influence is clearly part of the picture.

[Spooky23]

It’s one of the core attributes. Zimbabwe wasn’t going to be raising a trillion dollars of revenue.

[mandmandam]

> That’s the thing I can’t ever come to understand about crypto. It’s purely about perception of value.

It's not though. It became about that, in general, but there are crypto projects out there which don't focus on hype or valuation.

It is functional and useful to be able to move value worldwide for 10% of the energy of a credit card transaction, decentralized, at sub-second speed, with no fees, even when just moving tiny fractions of a cent.

There are a lot of maxis and bag holders trying to prevent people from figuring that out, but sooner or later a crisis will hit and everyone will remember what crypto was about in the first place.

[AnthonyMouse]

> At least with some precious metal, it has a floor value as a function of its practical uses and abundance.

Suppose the price of gold is 80% perception of value and 20% utility for making electronics etc. Then if you buy it, 80% of what you buy is perception of value. You could get the same result by buying 80% Bitcoin and 20% commodity rock salt. Is someone who buys the latter any more of a sucker? What about somebody who then decides to divest the rock salt because it has a below-market rate of return when they have no direct use for it?

[dumah]

There’s at most a zero floor value on holdings of government debt, corporate equities, bank holdings, and any asset held by a custodian.

The floor value of physical commodities with significant storage costs is negative.

The market is aware of these possibilities and these risks are generally recognized as being embedded in asset prices as premiums.

[mlinhares]

In this specific case its also about buying access, so I doubt he'll rug pull, he can just direct the access requests to buy something.

[catlifeonmars]

Precious metal floor value is not immune either, since (1) it is dependent on supply and (2) specific technologies/industries that require their use may become diminished or obsoleted. Definitely a lot less volatile than something not bound by reality though.

[sali0]

The legal landscape forced the industry to be purely financial. Hopefully this changes soon.

[__MatrixMan__]

Are you proposing that "value" is meaningful in the absence of some perceiver? All value is the perception of value. The only difference is that it's easier to find people who value precious metals, but that sort of thing always depends on where you look. One can easily imagine situations where a position at the front of a queue is more valuable to the people nearby than a gold coin. Finding value in a blockchain is no different.

It's just that none of the blockchains have yet managed to situate themselves such that people are likely to value their effects. Instead they're focusing on scarcity, which is kind of silly because all of the competition is equally empowered to create artificial scarcities. I think they'll figure it out eventually.

[lesuorac]

> Are you proposing that "value" is meaningful in the absence of some perceiver

Yes.

Gold conducts electricity.

Bitcoin has no physically useful properties. However, I will admit a public ledger is actually probably very good for the USA so we can see all the grifting easily.

[cle]

Nobody cared that gold conducted electricity until very recently in human history.

[hinkley]

The American dollar is also about perception of value, but via a maze of interlocking attributes that make it slow to move.

A new fiat currency without a state sponsor is fragile by comparison. Always will be.

[lanstin]

But it isn’t just the military and the taxes, it is the labor of all the people who are willing to work for US dollars that give it value. While the majority of people paid in dollars are hard working and generally honest, it seems that the majority of people paid in cryptocurrencies are scammers or criminals in one way or the other, or else financial operators. So till more people are getting paid in bitcoin or whatever I don’t see why anyone will find it something other than a speculative asset for dollar owners.

[NoLinkToMe]

Agreed.

Even the scarcity is artificial, and based something between a contract and a gentleman's agreement, not any physical reality.

That is, the bitcoin software can be changed if enough people want to, to make more of it. And you can create infinite copies of bitcoin software and call it bitcoin or something else.

That's simply not true for the scarcity of gold.

Finally, insofar as there are uses for the blockchain, the ostensible finite volume of bitcoin has no bearing on anything, as you don't need 'one of 21 million bitcoin' for its blockchain functionality, you can use 0.1 or 0.0001 bitcoin. It's infinitely divisible, and a small unit of bitcoin can get you blockchain functionality.

And yet I've begun to put 5% of my monthly savings into it, as it seems to have become the long-term speculative asset. It doesn't seem to be going anywhere. But it really appears like an utterly ridiculous proposition, a self-fulling prophecy.

[WinstonSmith84]

You're mixing up a bit everything. Bitcoin is totally different from Ethereum or Solana and these 2 networks are different from all the NFTs and meme coins launched on these Ethereum and Solana.

By the way, if you thought that Trump was doing something illegal, which certainly sounds suspicious, well it isn't. This guy gives a good overview of the why https://x.com/wassielawyer/status/1881995797245600248

[kasey_junk]

It’s not illegal for a celebrity to launch a meme coin or collectible. It’s not as clear if the President and his direct family can do the same.

Anti-bribery/corruption is the concern with the coins (just as it was with his hotels in the first administration). Not the legality of the coin.

But it’s moot, this admin has decided that norms don’t constrain it and it will not allow investigations into itself. So it’s de facto legal.

[doomroot]

There are pros and cons of cryptocurrencies as money, just like gold, which cause people to speculate on the price.

[myvoiceismypass]

What are the pros of the trump coin or the melania coin?

[Cthulhu_]

A brainwashed group of drones that are willling to pay money for it.

But I'm convinced most people that buy memecoins like that are thinking that there's other suckers that will buy it and make the price go up.

[miohtama]

There is brand value in Trump.

Trump is the largest meme on this planet.

What should be the fair value of his fan coin?

[dotcoma]

Zero in 4 years’ time.