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Author Topic: Long read: An Institutional Investor's Take on Cryptoassets  (Read 41 times)
Savik
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February 13, 2018, 07:25:22 PM
 #1

It is very long, but very good. Has anyone read this paper by John Pfeffer? Scroll to the conclusion on page 22 for a shortened TL;DR.

https://s3.eu-west-2.amazonaws.com/john-pfeffer/An+Investor%27s+Take+on+Cryptoassets+v6.pdf

Anyone's thoughts on the topic? BTC as a store-of-value will be more valuable than anything else as a means of payment, or protocol.

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February 13, 2018, 08:12:54 PM
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 #2

It is very long, but very good. Has anyone read this paper by John Pfeffer? Scroll to the conclusion on page 22 for a shortened TL;DR.

https://s3.eu-west-2.amazonaws.com/john-pfeffer/An+Investor%27s+Take+on+Cryptoassets+v6.pdf

Anyone's thoughts on the topic? BTC as a store-of-value will be more valuable than anything else as a means of payment, or protocol.

My first issue, even without reading the paper, is that in order to be a store-of-value, there must be some value to store. If Bitcoin is nothing more than a store-of-value, then it has none.

Now, on to the paper.

The author claims that PQ (in MV = PQ) is the the cost of running the system (mining in the Bitcoin case), and concludes that the value of M can be primarily based on its use as a store-of-value, with little regard to its utility as a payment system. Unfortunately, that is both circular reasoning and contradictory in the Bitcoin case. The truth is that the cost of mining depends on M because of the subsidy and on the utility as the payment system because of the fees. Please note that M, in this case, represents the value of the money supply.

M depending on PQ when PQ depends on M is circular reasoning. Actually, both depending on each other is reasonable if you consider it to be something like a feedback loop, but in that case both M and PQ must then depend on other factors.

M depending on the cost of mining, which in turn depends on fees, is a direct statement that M depends on the utility as a payment system. Thus the conclusion that Bitcoin's value can be unrelated to its utility as a payment system is a contradiction.

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February 13, 2018, 08:29:57 PM
 #3

I think coins like bitcoin and some privacy coins will be more valuable than tokens in the future, personally I think they are less likely to decrease in value in the long term compared to tokens.

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Savik
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February 14, 2018, 12:52:21 AM
 #4

It is very long, but very good. Has anyone read this paper by John Pfeffer? Scroll to the conclusion on page 22 for a shortened TL;DR.

https://s3.eu-west-2.amazonaws.com/john-pfeffer/An+Investor%27s+Take+on+Cryptoassets+v6.pdf

Anyone's thoughts on the topic? BTC as a store-of-value will be more valuable than anything else as a means of payment, or protocol.

My first issue, even without reading the paper, is that in order to be a store-of-value, there must be some value to store. If Bitcoin is nothing more than a store-of-value, then it has none.

Now, on to the paper.

The author claims that PQ (in MV = PQ) is the the cost of running the system (mining in the Bitcoin case), and concludes that the value of M can be primarily based on its use as a store-of-value, with little regard to its utility as a payment system. Unfortunately, that is both circular reasoning and contradictory in the Bitcoin case. The truth is that the cost of mining depends on M because of the subsidy and on the utility as the payment system because of the fees. Please note that M, in this case, represents the value of the money supply.

M depending on PQ when PQ depends on M is circular reasoning. Actually, both depending on each other is reasonable if you consider it to be something like a feedback loop, but in that case both M and PQ must then depend on other factors.

M depending on the cost of mining, which in turn depends on fees, is a direct statement that M depends on the utility as a payment system. Thus the conclusion that Bitcoin's value can be unrelated to its utility as a payment system is a contradiction.


How about the case of gold? Isn't that almost purely a store of value just because its shiny and society puts a value on it?

I do see your point about the fees being a driving force for miners to mine, but if BTC had 0 fees tomorrow and only block reward payouts then would mining come to a halt and price crash down?

What do you think about his distaste for protocols and the theory that constant forking will occur to dilute them down to purely the cost of computing?

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February 14, 2018, 10:38:35 AM
 #5

How about the case of gold? Isn't that almost purely a store of value just because its shiny and society puts a value on it?

I do see your point about the fees being a driving force for miners to mine, but if BTC had 0 fees tomorrow and only block reward payouts then would mining come to a halt and price crash down?

What do you think about his distaste for protocols and the theory that constant forking will occur to dilute them down to purely the cost of computing?

Gold had a very long tradition as a currency. I feel that its value is still supported by that tradition, but it won't last forever.

I can't think of why an absence of fees would cause all miners to quit while they still earn the subsidy.

The idea that a very large number of forks will dilute the value is not supported by history. There are thousands of cryptos (most of which are worth very little compared to the value of Bitcoin), and Bitcoin is still about 40% of the total. The network effect determines where the value will go. Eventually, we will see only a handful of significant currencies, and the rest will be niche coins at best.

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Savik
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February 14, 2018, 12:07:14 PM
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Good point about gold historically used as a currency

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