tag:blogger.com,1999:blog-6704573462403312459.post2537250546191817821..comments2024-03-29T02:53:03.321-04:00Comments on Moneyness: A case for bitcoinJP Koninghttp://www.blogger.com/profile/02559687323828006535noreply@blogger.comBlogger32125tag:blogger.com,1999:blog-6704573462403312459.post-27841880973877260222022-08-13T12:17:47.269-04:002022-08-13T12:17:47.269-04:00“ But you can't deny that bitcoin is a zero-su...“ But you can't deny that bitcoin is a zero-sum game in the sense that the xth participant will make a pecuniary return if a yth participant emerges.”<br /><br />I don’t think it is relevante because that would be also true for google or any other service or good in order to generate cash flows. You also need someone emerging in the future demanding the good or service, which may not happen with enough intensity to produce a positive cash flow.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-7980126113649151802018-06-22T06:42:29.496-04:002018-06-22T06:42:29.496-04:00Well, I see no flaw in JP Konning's argument. ...Well, I see no flaw in JP Konning's argument. All it takes is for crypto guys to change their narrative, and openly assume that crypto is a pyramid scheme at heart (which it is!!!).Harry Limehttps://www.blogger.com/profile/14598300568437604261noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-17497879826592719192018-06-20T10:05:52.350-04:002018-06-20T10:05:52.350-04:00The gamblers usually know they are gambling but av...The gamblers usually know they are gambling but average joe have no idea their retirement funds are played as part of a ponzi game. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-15846857793639764912018-05-24T07:34:44.964-04:002018-05-24T07:34:44.964-04:00Maybe the foolish demand is limited? But bitcoin i...Maybe the foolish demand is limited? But bitcoin is certainly an expensive way to entertain them.Jussinoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-92050021142596337102018-05-20T08:40:28.316-04:002018-05-20T08:40:28.316-04:00By the above, I mean that I consider the adage to ...By the above, I mean that I consider the adage to be *useful* investment advice. But its usefulness isn't due to being true if taken at face value, since it's false under normal circumstances. However, if you are mistaken about the proper valuation of something (and consequently see the market as irrational), the advice stops you from going broke.<br /><br />Of course, if the market is such that shorting is not possible, then it can actually be irrationally overpriced. But then you cannot go short either, so this is not where the advice applies.Basil Martehttp://users.itk.ppke.hu/~marba1noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-6903634406920038212018-05-17T16:40:50.909-04:002018-05-17T16:40:50.909-04:00I believe that an investor/speculator wrongly beli...I believe that an investor/speculator wrongly believes himself to be rational (and hence, the market irrational) far more easily, than I believe that a lone investor gleans something from publicly available data that the rest of the market doesn't. That is not to say that the latter doesn't exist, but it's far more rare than single investors wrongly thinking themselves more rational than the market.<br /><br />IIRC somewhere you wrote that "on the run" bonds were more liquid. There are more than enough traders in T-securities for the EMH to apply. There really should be a less implausible explanation for the phenomenon than market inefficiency.Basil Martehttp://users.itk.ppke.hu/~marba1noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-21714678594599866462018-05-17T00:17:48.248-04:002018-05-17T00:17:48.248-04:00"The main difference with the letter chain is..."The main difference with the letter chain is that while the letter chain is going on, it doesn't serve anything useful for society. That's why it's like cancer. It uses some strong social dynamics for bullshit purposes." <br /><br />I'm not convinced that a chain letter is a cancer. Is poker a cancer? It's a zero-sum game that doesn't provide anything useful. But people have fun playing it. Same with a chain letter or a ponzi. It's an entertaining game. <br /><br />"Bitcoin is like a letter chain that – in the meantime – is money and store of value. With that notion, I accept this analogy."<br /><br />Ok, but what if someone designed a new type of chain letter that allowed for your spot in the chain to be digitally transferred to someone else? Maybe you could buy a coffee with it. Would you support that kind of chain letter?JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-11929415712810093042018-05-16T22:48:03.599-04:002018-05-16T22:48:03.599-04:00"I mean, if somebody told you there's a s..."I mean, if somebody told you there's a speculative bubble in S&P500 or in T-bonds, you could ignore that assertion out of hand, because it's simply impossible. These securities are simply too easy to short for there to be a bubble. Even "average" stocks have enough liquidity for that."<br /><br />You don't believe in the adage that the market can remain irrational longer than you can remain solvent? Another thing that pops to mind is the "on the run" bond premium. Why does that not get arbitraged away?<br /><br />"Rationally, yes. Actually, unfortunately most people don't understand economics....that bus or bike lanes should be created to draw more people to use these modes."<br /><br />Yep, agree with you on that.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-47738098905166408002018-05-16T10:47:49.240-04:002018-05-16T10:47:49.240-04:00Sure, there are limits of the scheme analogy, I ag...Sure, there are limits of the scheme analogy, I agree. However, I think it works for Bitcoin as well. First of all, this notion that new people coming into Bitcoin are essential for its existence is a theory at best. There are new people coming and other people betting on it. However, it doesn't mean it would not work without it. Yes, probably the price would be way lower, but it may still reach a critical mass above which it will not die. Since I use Bitcoin as a medium o exchange quite a lot – I can definitely see it.<br /><br />The main difference with the letter chain is that while the letter chain is going on, it doesn't serve anything useful for society. That's why it's like cancer. It uses some strong social dynamics for bullshit purposes. Bitcoin is like a letter chain that – in the meantime – is money and store of value. With that notion, I accept this analogy.<br /><br />>"it absorbs the economic growth." Not sure what that means.<br />When people using Bitcoin create more goods and services, those goods and services being chased by the same number of coins, and deflation happens. The economic growth pays off the national debt in the same way. <br /><br />>Yep, a lost bitcoin is exactly like a new entrant.<br />I agree. I mention it as one of three forces driving the price long term.<br /><br />>Central banks hold gold to vote?<br />Ok, I admit that I've read too much of Jim Rickards' books and did a bit of a stretch. In my opinion, gold in the central banks' vaults is used as kind of a "Proof-of-Stake" voting. It's rarely exchanged – the majority of the time it sits in the vault to demonstrate the power of the owner. This power can be used to enforce some of the owner agenda in case of a dispute. Rickards point is that in case of global financial collapse; it may be used to establish "the new order" what is the main reason why Russia and China are buying gold right now. I don't necessarily support this claim fully, but it's an example of such a "voting" situation. <br /><br />The most important aspect of it is that no central bank will ever say: "ok, the price of gold is so high that it's the time to take profits." No, they will keep a big chunk of it forever, possibly increasing it over time.kloshttps://www.blogger.com/profile/05171795818060948733noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-51791473103763140082018-05-16T09:31:09.441-04:002018-05-16T09:31:09.441-04:00Hi klos,
"Doesn't fiat money fit into t...Hi klos, <br /><br /><i>"Doesn't fiat money fit into that broad Ponzi definition as well?"</i><br /><br />I've written about this a lot, but the short answer is no. Banknotes and deposits are backstopped by an issuer. Their value doesn't depend on another person entering the game. <br /><br /><i>"Yes, Bitcoin has many properties of such schemes (as many other things), but it doesn't prove it will end like one. "</i><br /><br />End like one? I don't see why a chain letter can't continue indefinitely.<br /><br /><i>"Cryptocurrency is also similar to a religion. A lot of people are in Bitcoin not for profits but for ideological reasons: cypherpunks, developers, miners, people who invested everything,...so I intuitively feel the power of this community that many experts miss entirely."</i><br /><br />Yep, I've written about bitcoin's plunge protection team. <br /><br />http://jpkoning.blogspot.ca/2013/04/bitcoins-plunge-protection-team.html<br /><br />Traditional chain letters can of course have their true believers too, and that can help them continue. But that doesn't stop them from being zero-sum games. <br /><br /><i>"it absorbs the economic growth."</i> Not sure what that means.<br /><br /><i>"Then we have Bitcoins being lost continuously." </i><br /><br />Yep, a lost bitcoin is exactly like a new entrant. Both absorb the selling of someone who wants to exit, thus allowing the chain to continue. We might also imagine a stock bubble, and people losing their bearer shares. But that wouldn't stop us from calling it a bubble (i.e. a an early bird zero sum game.<br /><br /><i>"Then we have Bitcoins used not to buy stuff but rather to keep the voting power (golden bars held by central banks works similarly)."</i><br /><br />Central banks hold gold in order to vote? I don't follow. People buy bitcoin in order to vote? On what?JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-81622234062753017702018-05-16T03:50:34.748-04:002018-05-16T03:50:34.748-04:00Doesn't fiat money fit into that broad Ponzi d...Doesn't fiat money fit into that broad Ponzi definition as well? The only thing that separates us from the hyperinflation is a collective delusion. All value is subjective.<br /><br />Yes, Bitcoin has many properties of such schemes (as many other things), but it doesn't prove it will end like one. Cryptocurrency is also similar to a religion. A lot of people are in Bitcoin not for profits but for ideological reasons: cypherpunks, developers, miners, people who invested everything, etc. It's not about gains anymore. For them, Bitcoin is part of their identity. Those people – called by Trace Mayer "hodlers of last resort" – will never sell. This is where the Ponzi analogy breaks. I met a lot of those people, so I intuitively feel the power of this community that many experts miss entirely.<br /><br />Bitcoin is not a zero-sum game. First of all, like other forms of money, it absorbs the economic growth. Then we have Bitcoins being lost continuously (deflation). Then we have Bitcoins used not to buy stuff but rather to keep the voting power (golden bars held by central banks works similarly). Those three forces can keep the price growing as long as the civilization is going.kloshttps://www.blogger.com/profile/05171795818060948733noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-45882062457480610272018-05-15T19:03:32.244-04:002018-05-15T19:03:32.244-04:00Hello JP,
None of my points contradict your concl...Hello JP,<br /><br />None of my points contradict your conclusion, just show that some pieces of the argument you brought in as support for that ("zero-sum game on top of stocks annoys investors") don't really hold. I mean, if somebody told you there's a speculative bubble in S&P500 or in T-bonds, you could ignore that assertion out of hand, because it's simply impossible. These securities are simply too easy to short for there to be a bubble. Even "average" stocks have enough liquidity for that.<br /><br />"Economists traditionally advocate for legalizing drug markets."<br />Some do; others advocate for more effective policies to curtail its activity. The main example is that authorities shouldn't go after the supply side so much (because that drives quality down, as you mentioned), instead they should target the demand side.<br /><br />"It's easier to talk to people about the dangers of drugs and gambling when they are brought into the open."<br />Rationally, yes. Actually, unfortunately most people don't understand economics. Thus I believe there are two very large confounding factors.<br />1) If the activity is illegal, it breeds an opaque market with wildly varying quality, and usually quite a bit of violence behind the scenes. The presence of these ancillary bads makes it easier to convince people about the dangers of the product. Economically, this is a non sequitur, but is highly convincing to most people.<br />2) Possibly many people see The Law as a thing that just is. If something is illegal, they see it as "inherently" illegal. To suppose that it could possibly be not illegal simply doesn't make sense to them.<br />3) To draw a parallel, I'll refer to the congestion charge and other traffic economics. Apparently, most people don't understand commons problems, and seem to model the problem as if there were a fixed number of cars. They don't seem to think about substitute services either. Thus if somebody proposes a congestion charge, or road diet, etc., most people imagine that the number of cars will stay the same, and they evaluate the proposal negatively. I've experienced this firsthand: a few years ago, my home city tried to introduce congestion charging. Even though multiple newspapers explained how that works, still there was enough public opposition that the mayor backpedaled on the issue.<br />By the same token, many people don't understand the "you don't build a bridge because too many people are swimming across the river" idea, that bus or bike lanes should be created to draw more people to use these modes.<br /><br />+1: Not only is Bitcoin a pure betting game, there are also a few cash-settled(!) "Bitcoin futures" built on top of it (sold in packages of $10), plus a "perpetual futures" synthetic Bitcoin on BitMEX.Basil Martehttp://users.itk.ppke.hu/~marba1noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-17530609632531195332018-05-14T11:35:22.464-04:002018-05-14T11:35:22.464-04:00Pete, just looking through it, the Ponzicoin link ...Pete, just looking through it, the Ponzicoin link perfectly illustrates the demand for safe and transparent ponzi games. Will check the other one out too.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-78752111514297566052018-05-14T11:14:17.519-04:002018-05-14T11:14:17.519-04:00Hi Basil,
"If some stocks can go into a spe...Hi Basil, <br /><br />"If some stocks can go into a speculative bubble, then.. to this they cannot correct the pricing error."<br /><br />I have no problem with that. Maybe you can explain further why that contradicts my argument? <br /><br />"Traditionally, irrationality of market actors (e.g. gambling) is seen as a problem (by macroeconomists and politicians) or as an opportunity to rip people off (by con-/businessmen)."<br /><br />Dunno about that. Economists traditionally advocate for legalizing drug markets. <br /><br />"The view that these schemes should be allowed, because their existence increases social welfare---rather than trying to educate people so that they don't fall for them---is quite ...outside the Overton window."<br /><br />Allowing these schemes isn't an alternative to trying to educate people about not falling for them. It's easier to talk to people about the dangers of drugs and gambling when they are brought into the open. <br /><br />"Your comparison of Bitcoin to a chain letter is rather shaky, because the stake is transferable (as a vestige of its originally intended purpose to serve as money)."<br /><br />It's not a perfect comparison. In a modern version of the chain letter, maybe you could be able to sell the letter to someone else.. .i.e. offload your position in the chain. But I don't think that would change any of my arguments.<br /><br />"Sure there is, the price of computing hardware (GPUs, in particular) have been rather inflated by the Bitcoin mining craze"<br /><br />Yep, good point.<br />JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-22899818828052555822018-05-14T09:55:17.811-04:002018-05-14T09:55:17.811-04:00Hi JP - great insights as always. You might be awa...Hi JP - great insights as always. You might be aware that there have always been quite a lot of explicit Ponzi schemes running on the Ethereum blockchain. The ability to execute smart contracts gives investors a little assurance that the scheme will be executed faithfully, though the average investor still loses money. One of the most interesting was even called PonziCoin, and was always meant as a joke, but even so investors got very excited about it. If you have time to spare, it's interesting to track the discussion and reactions in real time here: https://bitcointalk.org/index.php?topic=474730.0. This reinforces your point that there really is demand for these sorts of schemes.<br /><br />This paper by Bartoletti, Carta, Cimoli and Saia provides a great overview of Ponzi schemes on Ethereum: https://arxiv.org/abs/1703.03779Pete Zhttps://sites.google.com/view/peter-zimmerman/noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-14978721302774622018-05-14T08:58:25.778-04:002018-05-14T08:58:25.778-04:00Jason, I don't have any objection to thinking ...Jason, I don't have any objection to thinking about liquidity premia extending over many decades. JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-59527879328526782112018-05-14T08:53:17.074-04:002018-05-14T08:53:17.074-04:00"By holding a good for its liquidity services..."By holding a good for its liquidity services, you are obtaining a service of protection against uncertainty."<br /><br />Certainly.<br /><br />But that doesn't change the fact that if you hold a liquid bond (for example), and that bond provides a flow of liquidity services that an illiquid bond doesn't, and a liquidity premium develops, that premium is based on the premise that others will emerge to quickly buy the liquid bond. If this premise fails, then the liquid bond becomes an illiquid bond and the premium diseappears.<br /><br />Put differently, a liquidity premium is a ponzi game that provides a valuable set of services. But its still a ponzi, a type of zero-sum game. <br /><br />"For example, renting an IP address allows you to visit web sites."<br /><br />Ok, but what is your bitcoin example?JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-12468791471999290922018-05-12T12:10:53.737-04:002018-05-12T12:10:53.737-04:00Sometimes I wonder how much the classic example of...Sometimes I wonder how much the classic example of bubbles, the tulip mania, was a pure bubble, rather than a topological catastrophe. Let me explain. Take an asset/commodity with very inelastic supply that is also a Veblen good (which tulips definitely were). The latter category is defined by having an inversion in the demand curve. However, that inverted part cannot continue infinitely, because at some point "society runs out of money" (which is an awful way to phrase it, I know), and the demand curve inverts again into a normal sloping direction.<br /><br />Now, given this setup, what happens if the (inelastic) supply falls, or equivalently, the demand curve shifts to the right? At some point, the lower intersection of the curves ceases to exist, because it falls off the inversion point of the demand curve. However, there *is* another stable intersection, just at a much higher price. In theory, the price should quickly jump there. (Of course, this "fundamental jump" sets off a speculative bubble, but in principle, after the bubble pops, the price should still stabilize at the very high level, because that's the only intersection it can stabilize at.)<br /><br />Now, after some time, the very high price will result in a gradual increase of supply. Eventually, this will shift supply beyond the high-price inversion point of the demand curve, and the price will quickly plummet. However, this is distinct from a speculative bubble popping, because the preceding price plateau could have lasted for a long time.<br /><br />Naturally, there exists a mirror image of this setup. Take a "self-complementary" good, such as telephone, with an infinitely elastic supply (e.g. due to a monopoly). Initially, the marginal utility of telephones is small, because there are very few others to call. Nonetheless, this marginal value is positive, thus the company can offer a lower price. At that point, as the number of telephones starts to rise, their marginal value increases, and the company can charge more, without decreasing demand. However, there is a point that if the company tried to charge more that that, the price would exceed the marginal utility of telephones, and people would cancel their subscriptions. And as the number of telephones decreased, their marginal value would fall, unwinding the whole network.<br /><br />Both of these cases are examples of a hysteresis loop in the supply-demand diagram. Mathematically, look at this diagram with *a* having a fixed negative value: en.wikipedia.org/wiki/Catastrophe_theory#Cusp_catastropheBasil Martehttp://users.itk.ppke.hu/~marba1noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-73709986688765228132018-05-12T11:56:07.240-04:002018-05-12T11:56:07.240-04:00There is certainly a large core of truth in your a...There is certainly a large core of truth in your argument, but there are also multiple errors (which may or may not invalidate it).<br /> - If some stocks can go into a speculative bubble, then the market for that stock was inefficient in the first place. Were it efficient, arbitrageurs could have shorted the stock and popped the bubble well before it inflated to any significant size. Sometimes, though, it happens that a security (or other asset, e.g real estate) cannot be shorted, and even a tiny minority of market participants (on the order of 1%) can bid its price up into a bubble. In this case, even though 99% of participants anticipate (correctly, even) that the price will come crashing down, they cannot make a profit off of that by shorting it---and as it happens, due to this they cannot correct the pricing error. (To avoid any possibility of misunderstanding: shorting does not lower the price due to increasing quantity. Shorting lowers the price because the sellers throw a bunch of *market* sell orders at the exchange, thus wiping out the top bids. The top bid price and last-filled-price move down; the top ask doesn't necessarily follow, so the bid-ask spread may widen a bit. In other words, it's the market impact cost of the short seller that moves the price initially.)<br /><br /> - Traditionally, irrationality of market actors (e.g. gambling) is seen as a problem (by macroeconomists and politicians) or as an opportunity to rip people off (by con-/businessmen). The view that these schemes should be allowed, because their existence increases social welfare---rather than trying to educate people so that they don't fall for them---is quite ...outside the Overton window. You might as well be saying that "positional goods are great, because they provide a solution to the question of how to soak up infinite productive capacity while only producing finite utility". (Keynesians should like this statement.)<br /><br /> - Your comparison of Bitcoin to a chain letter is rather shaky, because the stake is transferable (as a vestige of its originally intended purpose to serve as money). A stock bubble is much closer in mechanism, except, of course, a stock actually promises some underlying stream of dividends. Indeed, looking back to the first point, it is difficult to short Bitcoin (as far as I know).<br /><br /> - If you separate investment and speculation (Platonic ideal holding period: forever and one tick, respectively), the first is the positive-sum (well, hopefully positive-sum) game, where somebody uses your capital more efficiently (with a higher return) than you could have used it yourself. On the other hand, the "ideal speculator" doesn't hold positions long enough to actually get much income from the underlying revenue stream, instead gaining arbitrage profits from closing market errors---which comes at the expense of whoever held the opposite position. This is true even if the other person doesn't particularly care about that, e.g. because he is a retail investor saving for retirement.<br /><br /> - "so there is no underlying real good that can be contaminated by the presence of zero-sum game players."<br />Sure there is, the price of computing hardware (GPUs, in particular) have been rather inflated by the Bitcoin mining craze.Basil Martehttp://users.itk.ppke.hu/~marba1noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-52991183280134691302018-05-12T11:21:18.074-04:002018-05-12T11:21:18.074-04:00By holding a good for its liquidity services, you ...By holding a good for its liquidity services, you are obtaining a service of protection against uncertainty. By controlling an identifier defined within a protocol, you can control computers connected to the network that belong to other people. For example, renting an IP address allows you to visit web sites. These are two examples of utility that do not depend on a financial profit.<br /><br />On the other hand, almost anything that has sufficient durability and you have a sufficient control over its supply can be used as a basis for a zero-sum game.<br /><br />For the two reasons outlined (existence of non-pecuniary demand and zero-sum game being able to be based on a wide range of goods/services) I object to the analogies drawn in the article.Peter Šurdahttps://www.blogger.com/profile/02219200720577247444noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-73913753928232716002018-05-11T18:24:17.627-04:002018-05-11T18:24:17.627-04:00Well, here's my Shower Thought: a store-of-val...Well, here's my Shower Thought: a store-of-value premium is a liquidity premium calculated over decades rather than days.<br /><br />Say I have a lump of gold in one hand and a Swiss franc in the other. I know the gold will fetch a lot more than the metal's utility would suggest. I know the franc will fetch a lot more than paper's utility. And I'm confident both of these pricing anomalies will hold tomorrow. I could chalk it up to mass delusion, or I could ask what services each of these objects are providing to the economy besides what I can see and feel.<br /><br />Like anyone holding anything, I "value the ability to pass something off to the next person in a transaction <i>at the same price</i>" to whatever extent I need liquidity. The liquidity premium I assign to the franc instead of the gold doesn't come from my values. It's reasoning from induction: a lifetime of observing networks of exchange around Swiss francs (especially if I live in Switzerland). These networks are near ubiquitous and their participants behave predictably enough to get me in and out of francs without delays or volatility. That's worth something in itself.<br /><br />My assignment of a store-of-value premium to the lump of gold is another induction based formula. I can track gold's purchasing power over decades. My fifty year projection of gold's value is less exact than my five hour projection of the Swiss franc's value, but it's also less arbitrary than anything I might project for cryptocurrencies or rare comic books or Netflix shares. That too is worth something.<br /><br />If the induction based formula driving a liquidity premium goes something like <i>"thing has desirable properties of a liquid instrument, and therefore is liquidated more often, making it still more liquid for the next buyer or seller, and so on"</i>, then the formula driving a store-of-value premium goes something like <i>"thing has desirable properties of a store of value, and therefore people store value in it for longer and longer periods, making it a still more secure place to store the next holder's value, and so on"</i>. No?Jason Treitnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-47074946309531877072018-05-11T13:00:59.342-04:002018-05-11T13:00:59.342-04:00"Are you assuming that the supply of zero-sum..."Are you assuming that the supply of zero-sum game players is limited in any way. If that route becomes attractive, more people go there, right?"<br /><br />I think that's probably right. There's probably a permanent supply of repeat zero sum (early bird) game players, or regulars, and then once the game starts to grow people who have never played before jump into the game.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-50346641100328460302018-05-11T12:22:37.719-04:002018-05-11T12:22:37.719-04:00Peter, you're using zero sum in a different se...Peter, you're using zero sum in a different sense that I did in my post.<br /><br />I've argued that Mavrodi-style ponzi schemes may actually increase social welfare. But they are zero-sum games (specifically of the early-bird type) in the sense that the only way that the x-th participant will make a pecuniary return is if a y-th participant emerges. <br /><br />Same with bitcoin. I've admitted it may increase social welfare. Society enjoys ponzi schemes (in the same way that they enjoy lotteries and casinos), and bitcoin it is better than an underground ponzi. You think it increases social welfare too, but for different reasons. But you can't deny that bitcoin is a zero-sum game in the sense that the xth participant will make a pecuniary return if a yth participant emerges.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-64169591089617492512018-05-11T12:03:24.930-04:002018-05-11T12:03:24.930-04:00"...store-of-value premium, akin to liquidity..."...store-of-value premium, akin to liquidity premium, that's self perpetuating rather than anchored to other properties of the thing?"<br /><br />Dunno, what motivates individuals to drive this store of value premium? A liquidity premium emerges because individuals value the ability to pass something off to the next person in a transaction <i>at the same price</i>. The premium that zero-sum game players generate arises because they expect to be able to pass it off to the next person at a higher price. (Bitcoin is mostly the latter, a banknote the former). Are there other premia than this?JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-48061111408688728382018-05-11T08:51:25.722-04:002018-05-11T08:51:25.722-04:00Are you assuming that the supply of zero-sum game ...Are you assuming that the supply of zero-sum game players is limited in any way. If that route becomes attractive, more people go there, right? For example, index funds might be doing a great favour to the world by making intelligent people reconsider going into active investing due to the shrinking space. But if for whatever reason, the rewards in finance rise, they all come right back, don't they?Prakashhttps://www.blogger.com/profile/10227431671018440503noreply@blogger.com