From Adam Ludwin:
crypto assets are a new asset class that enable decentralized applications.
…A decentralized application is a way to create a service that no single entity operates.
…bitcoin, for example, isn’t best described as “Decentralized PayPal.” It’s more honest to say it’s an extremely inefficient electronic payments network, but in exchange we get decentralization.
…in order for decentralized applications themselves to have utility to some cohort, that cohort must be optimizing for censorship resistance.
Pointer from Tyler Cowen. Unlike almost everything else I have come across talking about Bitcoin, Ludwin’s whole post made sense to me.
“that cohort must be optimizing for censorship resistance”
I think more likely this is a way of saying censorship resistance is “money flows related to illegal transactions can’t be tracked.” Drug & human trafficking, money laundering, or avoiding capital controls. That seems like a big market.
Hey, VHS beat Beta because porn liked VHS more. That’s how these things go sometimes.
All transactions on a blockchain, including illegal transactions, are tracked in perpetuity, in public, and with perfect accuracy. In practice (not in theory), is is not difficult to tie an entity with a transaction history. (https://themerkle.com/remaining-wannacry-bitcoin-money-is-on-the-move/)
Gold, US $100 bills, or Tide laundry detergent (so the urban legend goes) make much better mediums of exchange.
If you look at the price movements of crypto-assets, it seems obvious that they’re woefully inefficient and mostly driven by investors of all stripes looking to jump at the chance of getting extra alpha in a world where it’s becoming increasingly scarce.
My favorite example is a coin called Hshare. After its ICO, it issued an additional 500 coins for everyone in circulation. It became the 11th highest coin by marketcap overnight. The next week the price went up an additional 27%!
Cryptoassets are very intriguing, and their price movements make some sort of investment an almost irresistible temptation, but the growth in marketcap so completely dominates the growth in transactions that it’s very murky what their endgame will be.
“crypto assets are a new asset class that enable decentralized applications.”
Crypto works just as well with centralized clearing, lateral clearing, gold standards, fractional reserve banking, and WalMart discount points.
Have I left anything out? Oh, yes. crypto supports the shoe monetary standard, we are going to get a crypto coin that will alway buy one pair of median casual shoe.
I find significant that Bitcoin movement are mostly determined by Chinese government changes lately.
The internet bubble was driven by internet stock trading; without Etrade and Datek, I don’t know if the internet bubble would have been as big. Bitcoin takes that further, it has its own built-in trading function, you don’t even need a broker. And like the internet bubble, bitcoin has a shortage of units to trade because a large part of the outstanding units are held by insiders that aren’t selling. That’s why I think futures and ETFs and other bitcoin derivatives will destroy bitcoin. Once there is no artificial shortage of units, the bubble will burst, just like the internet bubble burst when the artificial shortage of internet stocks had passed.