Your birthday is coming up. Your crazy Aunt offers you the choice between a $500 Amex Giftcard -- the holy grail of bday presents -- or a $500 gift card to somewhere you shop a few times a year. Say Nike, for example.
Which would you prefer?
Now imagine that a service emerged, called Giftcard0x that allowed you to seamlessly trade your Nike gift card into its cash / amex card value. Would you do it?
The key piece to understand is the optionality of cash and positive feedback loops between liquidity and value. The more *other people* demand your money, the more valuable it is
An Amex card is more valuable than a Nike card b/c it's easier to get rid of b/c more people want it
Interesting insights from the "toxic" battle of OSI vs TCP:
-Dev and corp. interest was a *contra* indicator of the winning protocol
-TCP / IP proponents were derided as "maximalists"
-OSI devt. was by committee and everything was open to debate, ultimately killing OSI
Ultimately on one end, TCP / IP was free, cheap and nimble. And OSI was more expensive, complete and elaborate
The overbureaucratized OSI, despite taking on hard technical challenges, failed and the internet converged on the more "simple" TCP/IP standard
- Openness is paradoxical. The more "open" a development process, the more closed the protocol became
The crypto boom w. ICOs is very similar to Yahoo during the dot com bubble. Yahoo ad revenue was entirely supported by spend from other, overhyped startups. Yahoo effectively became a levered bet on dot coms
ICOs have done the same, creating a massive amount of shadow convexity
Civilization is indistinguishable from diminishing time preference.
Keynesianism is accomplishing its primary goal of reversing this process: encouraging short term debt fueled consumption at the expense of capital accumulation. Savings down from over 15% to 3% in 30 years.
This goes hand in hand with the current political circus and consumerism, and Keynes, the champion of these policies, actually recognized it
When monetary systems debase, so do their civilizations.Taken to its logical conclusion either it reverses through a collapse or a proactive reengineering of incentive structures
As interest rates hit 0 and savings show no sign of reversing, I'm inclined to think it's the former
ETH gas % used is on the rise again to 90%, approaching the December highs of 94%. And this is without any application with material usage...
What's going on and what does the future look like for ETH?
Only 4 applications have more than 500 daily active users. ETH's supposed use case of "decentralized applications" is clearly not where the usage is coming from -- and yet blocks are still nearly full.
Over the past 24 hours ETH has had 812k transactions yet only 67k came from the top 100 apps.
So only 8% of ETH's transactions are from what's supposed to be the purpose of the network. What are the rest? Like ICOs and payments.
1/ Satoshi turned money into pure information. He transformed a hierarchical "client-server" based money into a flat p2p money. It is not a company. It is a client that allows you to trustlessly join a global economy
Understanding this is eye opening—but no new users do anymore
2/ We dramatically need to improve the new crypto user “onboarding flow”. Two big problems
- Majority of new entrants first experience is with coinbase and shitcoin trading.
- High % of “cranks” do to complexity of the space and potential $$ to be made
3/ The goal of onboarding should be to impress upon new users how different BTC and cryptocurrencies are than our current financial institutions *and the reasons why*. But instead, the opposite is happening
3/ The problem with these biz's is not that the equity mechanism is flawed. It’s that the moat of the biz *grows too large* and they can extract a rent instead of adding value. What we need is more competition, not a new incentivization mechanism. Fee != rent if it’s value add
1/ Are “alts actually back”? The crypto market moves in well defined cycles, and we just completed the 3rd major one. Inspired by @fundstrat, below is the best metric I've seen to show it: the % of alts (top 5-100 by MCAP) increasing 200% over 90 days.
2/ Howard Marks describes two ways to profit from markets: (1) buy more of what goes up and less of what goes down, and (2) cycle adjustment: building risk exposure when markets rise and reducing when they fall. Most people ignore the 2nd. Let’s dig in.
3/ Each cycle is more exaggerated than the previous. The first peaked at ~10%, the second >30%, and the last at ~70%. Absolutely crazy. 70% of alts went up 3x over 90 days. It was shooting fish in a barrel and way too overheated.
Many claim that the BTC bubble has burst. BTC isn't a bubble --it's a response to the very real bubbles in our economy today.
Govt control of money and the most important price in a capitalist economy--the interest rate--has caused distortions and true bubbles. Let's take a look
1. Since the 1970s we've been progressing through a long term debt cycle. Both federal and private debt have skyrocketed from 140% of GDP in 1970 to 367% in 2009 and even higher today.
2. This has been driven by a longer term reduction in interest rates. The fed funds rate has decreased from 17.5% in the 1970s to near 0 post 2009. This isn't due to natural market forces but fed direction. It's just starting to now rise for the first time (good luck Powell).
1/ Disagree w. @mwilcox.Security is a function of hash rate. When price + fees rise, hash rate follows.Moving activity off chain by definition doesn't reduce security if miner reward increases.What matters most for BTC security is what increases its value most over the long term
2/ Myopically, adding tx fees will increase reward. But the question is if it comes at the expense of long term larger price / demand gains. What makes BTC valuable? Its use as a censorship resistant & sound money, which stem from trust-minimization and decentralization
3/ The scalability debate was never about TPS, but about decentralization. Touting metcalfe’s law many argue that adding txn’s is unilaterally positive. But unfortunately most on chain TPS increases damage decentralization hindering resilience & ultimately LT price appreciation