The crypto thread

[El_Machinae]

I definitely don't mind having a speculative asset in my portfolio. Swinging for the fences can be life-changing, so why not? As long as I can make a reasonable case for actual growth in value, it's just a risk/reward calculation at that point.

But every piece of investment (in the finance sense) advice suggests buying stuff only if you can figure out a good reason why it should increase in value. All of my portfolio is arranged that way, even if some of my winning scenarios are 'unlikely'. With crypto, I don't know any reason to buy them except for hoping for a Greater Fool. It looks like Wall Street is finding value in Bitcoin because people are adopting it as a hedge. Specifically on Bitcoin, I think they're wrong and I don't like the footprint my price support would generate. I could have guessed that Wall Street would eventually nibble or that Retail would eventually nibble when rich people got utterly bored during the pandemic ... but I don't like investing based on what I'm guess social trends will be. I'm not savvy enough to guess which ones will be adopted into an ETF based on any fundamental criteria.

But I'm hard-pressed to think of why I'd ever want a crypto currency. It's not like I'll ever borrow against them or lend them out. And any regions that require them wouldn't have liquid wealth such that those transactions create any type of demand-support, because trade-flows will be crushed between that region and ours for some time and there'd be insufficient rule-of-law in the region to maintain any transfer of property as the price-support of the crypto. If we ever come across a scenario where I think there's any practical value to buying one, then getting ahead of that trend will let me bet on a winner

 

[RobAnybody]

I was about to quote parts of your post, but realized while doing so, I was just agreeing with all of it. So... rather: agreed. I maintain, the only reason to get "in" to Crypto is for speculative reasons. No rhyme, no reason. Only because it *might* increase in value, or, I guess, if it's named after your favorite comic book character.

Although, with that said, I do want to highlight this point...

Swinging for the fences can be life-changing, so why not?

I don't want to really advocate this aspect, but 1) it's a thing, & people are absolutely doing it; 2) if you have disposable income, it's probably better than playing the lottery, I guess?

 

[El_Machinae]

Every portfolio can have a risky portion, as long as its managed. With proper diversification, it can even be the winning strategy.

 

[Moriarte]

A bit of morning news :

“I happily played World of Warcraft during 2007-2010, but one day Blizzard removed the damage component from my beloved warlock’s Siphon Life spell,” Vitalik Buterin, the programmer who developed Ethereum’s original concept in late 2013, says in a bio hosted at about.me. “I cried myself to sleep, and on that day I realized what horrors centralized services can bring. I soon decided to quit.”

https://news.google.com/articles/CAIiEBWcnM8g-F1M5sdq6m02EGEqGAgEKg8IACoHCAow6IDNATDnu3cwhq6EAw?hl=en-LV&gl=LV&ceid=LV:en

It appears World of Warcraft is the one to blame for all that wasted energy!

 

[Zelig]

BLAKE3 is a pretty cool crypto. It performs very impressively with AVX-512.

 

[Moriarte]

That's a good way of looking at it: what do I want?* I don't want Bitcoin, although mainly because that window has closed.

I am not so sure it has closed. Big getting bigger and all that. Who would have thought in 2010 that Apple, which was worth iirc $100bn at the time is going to propel itself beyond 2.3 trillion? Apple is not an exception, a robust big company has less difficulty growing than an average small company. The monopolistic power, the power to buy out competition. That’s why I think that supporting big crypto, like eth, btc, or any of the big 10 really is a more sober approach than going for Zcash or Dash in the hope that they will be the next bitcoin. Yes, some people will guess right and win big. But, whatever happens in the world, the big crypto projects are going to continue absorb most of the market and, provided adoption grows, so will the market capitalisation. If we look at btc or eth gains during last 2 years or so, it has been 10 fold. That’s why I think owning big projects is a good risk/reward endeavour.

I am trying to understand how much room to grow there is left... before the whole thing saturates and stabilises, like other historical currencies. According to some data there’s $80tn worth of greenbacks in the world. Total crypto market cap is currently $2.2tn.

 

[Hygro]

It isn’t money.

 

[El_Machinae]

It will grow as more Boomers decide that crypto should be 1% of their portfolio as a hedge.

But I have trouble seeing more than two winners. One could become an asset hedge, like gold. The other creates actual utility.

After that, it's tracking the incentives to update the block chain. Right now, holders freeride on miners to confirm continuity. And that freeride either needs to continue or be paid for.

As soon as there is any type of holding fee, the zeitgeist changes. We pay fees on ETFs, but ETFs contain assets we expect to grow in value. The fees to track shareholder ownership are hidden in reduced profits from their shares.

Updating the block chain needs its incentives mapped

 

[Samson]

It will grow as more Boomers decide that crypto should be 1% of their portfolio as a hedge.

But I have trouble seeing more than two winners. One could become an asset hedge, like gold. The other creates actual utility.

After that, it's tracking the incentives to update the block chain. Right now, holders freeride on miners to confirm continuity. And that freeride either needs to continue or be paid for.

As soon as there is any type of holding fee, the zeitgeist changes. We pay fees on ETFs, but ETFs contain assets we expect to grow in value. The fees to track shareholder ownership are hidden in reduced profits from their shares.

Updating the block chain needs its incentives mapped

Have you looked at proof of stake? I have not quite got my head round it, but while not having a holding fee, you actually make more coins by holding and staking coins. Staking costs a small amount of energy (you do not do pointless calculations), and the risk is that you authorise malicious blocks and lose your stake.

 

[Moriarte]

I’d like to go through various slices of crypto industry, one by one, generalising them in vague categories, to raise awareness, and to better understand the utility of those myself. Time permitting, of course. The exchange-issued tokens.

The ‘exchange tokens’ recently appreciated in value considerably. The best of them, Binance (BNB) coin, mentioned in the poll, is currently a #3 most valuable in the world with $77bn. Increased from 7bn to 77bn in 6 months... this demonstration is simply to show the speed of adoption. Anyway, I am not too familiar with BNB specifically, but I know about it’s small cousin - FTX token (FTT). The idea: token, specifically issued by a crypto exchange. Holding of this token enables discounts for various types of activities on an exchange. Trading, margin trading, etc. The more one holds, the better discount one gets. In essence, the holders are incentivised to continue holding, as they continue to receive benefits in their trading activity. To give you a rough idea: holding $1000 worth of FTT gets you 5% discount on trades. Holding $100,000 get you to 25% and up to 5 mil, which gets a 60% discount. May be a negligible benefits for the day to day people, but a serious boon for a trading house, which operate at a volume.

Additionally, to keep from depreciating a certain (substantial) amount of both FTT and BNB crypto is burned weekly, i.e. destroyed irreversibly, so that’s designed to help. Since it’s inception, FTX burned $776 million dollars worth of it’s own “value”. Current market cap stands at $7bn and that should give you the rough idea of an extent of deflationary activity. Then, there are “airdrops”, a fairly recent invention, that spreads small gifts across the network, incentivising holders to continue holding. As a staker of FTT you get bonus votes, when it comes to governance of the token. Finally, exchange-traded token can act as cashy money - you can insta-transfer it anywhere in the world. However, that last bit is a mere by-product of every crypto project.

Overall, it’s a bag of sweets, picked up from other crypto projects and carefully presented as the new new thing. Since both BNB and FTT are very new projects, architecturally, it enabled them to incorporate all these traits into heir design painlessly, unlike Bitcoin, for example, which can’t do all those things even if it wanted, because, well... it’s too late. Architecturally, and because of various social factors, i.e. current holders reluctant to see changes to the protocol.

Currently there are 77 Centralised Exchange Tokens available and the list is growing, you can see them all in one place, here:
https://coinmarketcap.com/view/centralized-exchange/

 

[uppi]

After that, it's tracking the incentives to update the block chain. Right now, holders freeride on miners to confirm continuity. And that freeride either needs to continue or be paid for.

People holding something will create a small amount of transactions as people buy and sell the stuff they are holding. And the fees for those transactions can fund the mining. If anything isn't bought and sold, it would be difficult to put a price on it and you have a problem anyway. So I see no fundamental problem. There could be a practical problem, when buying and selling gets prohibitively expensive that it collapses the market, because no one wants to afford the fees.

 

[RobAnybody]

I am not so sure it has closed. Big getting bigger and all that.

But I have trouble seeing more than two winners. One could become an asset hedge, like gold. The other creates actual utility.

I tend to agree with El_Mac more than Moriarte, fwiw (although appreciate both perspectives). I lean Etherium, & towards the up-&-comers (& also I guess the ones named after my favorite super-hero, so I guess "just random" plays a part) because they will (some of them) provide actual use in the "real" world - if we could figure out which ones today, we'd be the geniuses that bought Apple back in the early '80's.

There *will* be altcoins that provide utility - those will provide actual long-term value (I don't know enough at present to say exactly how - if I did, I'd be rich in a few years). But there will also be those that are valued because they are simply... valued. Like all collectibles. Like gold. Gold, today, has no inherent value. Bitcoin has no inherent value. But they're both "famous", & so have intrinsic value based solely on that.

 

[Moriarte]

I don’t see much use for it in countries that have competent central banks. In cases where you have governments that inflate the currency or have a bogus official foreign exchange rate, they could be useful for circumventing those systems.

This year competent bank in my country started charging me money for cash lying around on a deposit account. It’s a small amount, but the money is bleeding. That’s because their competent overlords at Fed, ECB and BoJ decided to floor the interest rates and flood the economies with liquidity, 10 or so years ago. So, finally, the costs of negative interest rates are on me. I won’t be the one to judge, I’ll just say that Ethereum pays 5-7% annual return on idle funds lying around.. (staking) while the riskier cryptos pay 12% or even more, depending how risky you want it. The deflationary mechanisms are built-in in many of the top crypto projects, while the “real” economy is working on increasing inflation, pedal to the metal.

 

[Hygro]

Yea that is a weakness of crypto

 

[warpus]

Instead of focusing on blockchain technology as an investment strategy, why not highlight the wonderful technology that has already found so many uses around the world? Talking about this from the $$ angle just alienates all those people who don't have money to invest in anything or look down on people who do... or have a negative view of "crypto" due to the negative things you hear about it, such as the environmental costs of mining.

Blockchain tech is highly speculative and investment gurus will probably tell you that no more than 8-10% of your portfolio should be made up of such a volatile asset class. Even as of last year, Kevin O'Leary said that only 5% of his portfolio is made up of bitcoin, and that's what he recommends to his clients. He's a grade A you know what, but he seems to know what he's doing when it comes to investing, which is why I pulled his name in here (I don't really know any other investment bankers names offhand, especially those who might have made a comment like that)

So if you don't mind, allow me to completely ignore the question of $$ here and focus on the tech, which is really the important part of all this anyhow. And most people will think "Crypto? That's like a currency or something, right?.. And yes, it can be, but the technology can also be used for so many other things.

1. Blockchain technology is being used to help clean up plastic from the oceans. Huh.. how? Blockchain tech is essentially a publicly accessible ledger. You can store whatever you want on this ledger, including the tracking of any plastic or garbage picked up by a trawler. One of the issues with ocean cleanup is that companies overseeing the operation will hire third party entities to do the actual picking up plastic/garbage work. Those third party companies then rely on getting paid for the exact amount of plastic/garbage picked up, where it was picked up, what kind of garbage it is, etc. That's where blockchain tech stepped in to help out - The VeChain blockchain has been used to track all of this data and to help expedite the process of everybody getting paid what they're supposed to be getting paid. Keeping track of all this changing data on a set of spreadsheets, physical sets of paper, or some other online solution has always lead to problems. First of all, if you're not doing it on paper, you need to build up some sort of a framework to allow you to track all of this in various physical locations. Somebody on a trawler should be able to simply open up their laptop and type in some numbers and that's it. This approach has always lead to problems due to corruption, the age old issue of software development and how much it costs, and so on. It's never really worked well, and that's made it harder to attract people to get involved to help with the cleanup.

That's where the VeChain blockchain has stepped in and provided a solution. It is now being used in several places, including Indonesia, to track every part of the garbage pickup process, allowing everybody involved to immediately see the state of the entire operation at a glance. Any sort of discrepancy will be noticed by everyone immediately, and since the blockchain ledger is public, it also allows anyone to query any part of the operation. This makes it easier to pay those who are helping out without worrying that they might have fudged some numbers. And since the blockchain is already in place, initial setup costs are very low.

Source 1
Source 2

”The certification verifies the plastic extraction and quantities, which helps ensure fair compensation to the local collection cleanup team, like the local fishermen involved, and provides transparency into the collection process, ” says Antonio Astone, Global service manager Assurance and Supply Chain in DNV GL

With a community-driven solution, ReSea is improving living conditions and raising awareness in areas with poor waste management. The high level of transparency into the collection process enables businesses to trust their involvement has an environmental and social impact.

If you imagine what you could use a 100% secure & free ledger for, you're already thinking in the right direction, as to what this technology can be used for. I was going to highlight another use, but ran out of time for now

 

[RobAnybody]

This year competent bank in my country started charging me money for cash lying around on a deposit account. It’s a small amount, but the money is bleeding..

That sounds like a "Wealth Tax", so I'm curious what country you are in. I don't think (based on past elections here in the US) that would fly here in the US. Does it not apply to a basic checking/savings account as well? That's "cash lying around in a deposit account", so I'm curious.

Instead of focusing on blockchain technology as an investment strategy, why not highlight the wonderful technology that has already found so many uses around the world?...
The VeChain blockchain has been used to track all of this data and to help expedite the process of everybody getting paid what they're supposed to be getting paid...

Certainly not going to dissuade anyone from this, but I looked it up & VeChain is not currently traded on most popular exchanges & is currently valued at $0.11 per "coin", down from $.013 a month ago. Just throwing that info out there - I mean, go for it if you want to, but full information should be available.

 

[Ajidica]

Anyone know of a good relatively in-depth explanation of crypto and blockchain? My work is starting to look into it and I would like to both be more comfortable talking about it and have a useful link to explain to my supervisor.

 

[Moriarte]

That sounds like a "Wealth Tax", so I'm curious what country you are in. I don't think (based on past elections here in the US) that would fly here in the US. Does it not apply to a basic checking/savings account as well? That's "cash lying around in a deposit account", so I'm curious.

Europe, and no, not a wealth tax. The point is money are raining from the sky in nearly every country. Outcomes may vary, for example, your American savings account currently boasts national average of 0.06% on deposits. In other words, we are in an era of quantitative easing, where idle cash either doesn’t earn anything, earns negligible amounts or even affects your account negatively.

Under a negative rate policy, banks and other financial institutions are required to pay interest for parking excess cash -- beyond what regulators say they must keep on hand for safety reasons -- securely with the central bank.

Avoiding the charges is an incentive for banks to use their money to lend more to businesses and consumers, helping growth.

The ECB introduced negative rates in 2014. Its deposit rate is currently -0.5%.


The Bank of Japan went negative in 2016, mostly to prevent a strengthening yen from hurting its export-heavy economy. The BOJ uses aggressive asset purchases to guide short-term rates to -0.1% and the long-term rate to about zero.

(c) Reuters

 

[warpus]

Anyone know of a good relatively in-depth explanation of crypto and blockchain? My work is starting to look into it and I would like to both be more comfortable talking about it and have a useful link to explain to my supervisor.

Do you have any sort of computer science or related background? When I first got interested in the technology and wanted to know more about it, I read the bitcoin whitepaper first. It explains the basics of the technology..

The Bitcoin Whitepaper

IMO the whitepaper is a great starting point for learning more about blockchain tech, but it has obviously evolved quite a bit since then.. It also relies on you being comfortable with computer science concepts to some degree, although it is more or less written with the layman in mind. i.e. it's a summary and not a comprehensive overview.

All blockchain tech that exists is built on top of the principles explained in this whitepaper. So.. yeah, I would start there. That's if you are interested in the technology at least. If you just want to start trading, you don't necessarily need to know anything about the tech (although you probably should)

This whitepaper is not really something to send to your boss, but rather to start learning about teh tech yourself. IMO if you familiarize yourself with these basics, it will be easier to grok any subsequent articles you read or videos you watch on the subject

 

[Ajidica]

Do you have any sort of computer science or related background?

Not really. College majors were Economics and International Relations, with my computer knowledge basically consisting of when something doesn't work, google and follow instructions (after turning it off and on again).
But I'll give it a go, looking more for what it does more than than why it works, if that makes sense.