<I’m talking about people who “mined” their bitcoins (i.e, ran a computer and burned electricity to create them), not those who purchased them on the open market.>
That’s not what I’m asking. I’d like to know how much real money has been spent on buying crypto currency. What is the cost basis in the sense that people actually spent money on the tulip bulbs (sorry, crypto currency)?
Wendy
Wendy,
The dow is a weighted average…so how much real money has been spent on the Dow? It is non fungible. There really is no one value to say how much.
You are trying to say something about Cryptos during a bottom period. Would you fell foolish if Bitcoin was $60k two years ago for saying it is worthless?
Would you fell foolish if Bitcoin was $60k two years ago for saying it is worthless?
would you feel foolish if bitcoin was $60k two years from now after saying it is worthless?
ay caramba! I need an edit button.
That’s not what I’m asking. I’d like to know how much real money has been spent on buying crypto currency. What is the cost basis in the sense that people actually spent money on the tulip bulbs (sorry, crypto currency)?
Miners own about 10% of the 19 million Bitcoins in circulation. So a significant portion of the $3 Trillion number Krugman is using is Bitcoin with a near zero cost basis. It wasn’t all bought in the last 2 years. Whether the cost basis of crypto is $1 trillion or 1.5 trillion, who knows. But it’s no where near $3 Trillion based on the cost basis of the largest holders.
intercst
Miners own about 10% of the 19 million Bitcoins in circulation. So a significant portion of the $3 Trillion number Krugman is using is Bitcoin with a near zero cost basis.
It doesn’t follow that just because a miner holds it, that it has zero cost basis. It doesn’t even follow if the original miner holds it.
It all depends on when it was mined. It costs real money to mine bitcoin, have to buy a bunch of powerful computers, plug them in, and pay the power bill (both to run the computers and to cool the room). And it costs a lot more today than it cost 2 years ago, and a HUGE amount more today than 5-10 years ago.
https://www.investopedia.com/articles/forex/051115/bitcoin-m…
MarkR writes,
It doesn’t follow that just because a miner holds it, that it has zero cost basis. It doesn’t even follow if the original miner holds it.
It all depends on when it was mined. …
Absolutely!
No one is mining bitcoin and willingly spending more than the market price to mine it.
Ten years ago when Bitcoin was selling for $100, I doubt anyone was paying more than $90 to mine it, and large players with economy of scale had costs far less.
I said “near zero cost basis”. If you mined Bitcoin when it was selling for $100 in 2012 and it’s now
$30,000 plus, your cost basis is a small fraction of 1%, that’s close enough to “zero” for me.
intercst
IGU: While you make some reasonable points, you missed one big one: all of those other specie have some stable anchor attached. Usually it’s a country, but sometimes it’s a bank, and in the old days it could even be a hardware store or a barber shop. Sure those can, and sometimes did fail, but at least there was some anchoring mechanism to provide a measure of confidence behind the currency.
With crypto there is nothing except, well, it’s own credibility which can vanish in an instant. And has. And while there is fraud all through society, I dare say the amount of fraud with crypto is larger, as a percentage, than with anything else.
Bitcoin Leads Crypto Fraud As FTC Confirms $1 Billion Milestone
https://www.forbes.com/sites/rosemariemiller/2022/06/06/bitc…
In the last 12 months over $1 billion has been lost to fraud via crypto, not including its use in illicit or illegal activities. Surely that’s a gigantic proportion, unmatched by traditional, or even untraditional (specie) currencies in all but the most extreme circumstances.
Someday there will be regulation, presumably, although “how” is difficult to see given that anyone, anywhere can create it in a moment and disappear a moment later, but perhaps all of those issues will be overcome. For now, not. All of the supposed benefits seem not to be, all of the purported dangers do seem to be. No actual value created, much energy wasted in pursuit of… what? Best of luck to all those involved, but luck isn’t really what’s needed. Sense is, I think.
Me, I hardly ever use USD currency for anything any more. Almost everything goes on a credit card. For all I know, they’re turning it into Bitcoin somewhere on the processing end. Seriously, nobody cares so long as it’s functioning reliably.
Unless there’s something very weird about your personal situation, you’re still using USD currency. You’re not using actual physical paper bills or coins, but all of your transactions are denominated in USD, and that’s the medium of exchange your credit card company and banks and merchants and everyone else is using. No, there is zero chance that they’re ‘turning it into Bitcoin’ somewhere on the processing end. It’s going to be dollars all the way down.
Your point that “nobody cares so long as it’s functioning reliably” is exactly Krugman’s point, believe it or not. He’s pointing out that unlike the USD or Euro or other currencies, which are widely used in a whole host of transactions, there’s no legitimate use case for crypto that isn’t already completely being filled by something that’s already “functioning reliably” and much more efficiently. Sure, it’s great for criminal transactions, and it’s a nice way to avoid KYC laws. But in terms of actual uses, there’s nothing that a Bitcoin does - yet - that USD can’t do. Sure, you need intermediaries (like banks and credit card companies) to use USD in electronic transactions - but we’ve got a system that’s “functioning reliably” to accommodate that (which is why you never really need to use paper currency any more).
That’s the premise of his argument - not that crypto would lack value in the absence of fiat money competitors, but that it completely lacks value in a world where we already have a fully functional system that does everything that crypto does.
Albaby
there’s no legitimate use case for crypto that isn’t already completely being filled by something that’s already “functioning reliably” and much more efficiently.
This is simply not true. We are all using a lot of online content for free. Web3 means to harness the use of content to pay the content makers. For people who would have unquestioned copyrights but the Digital Millennial Copyrights Agreement has denied. Meaning when you see images, read stories, hear music on Google and FB etc etc…the transmission of that content is free for use and free from major online companies paying the creators.
To sell the content created the creators need online venues. Web3 is developing as systems that will validate views and pay content creators.
The root of this at first is Ethereum’s NFT contracts that allow digital content creators to establish higher value “originals”, if you will.
The uses for all of this are very important to millions of content providers and hundreds of thousands if not millions of collectors of all sizes.
It is too easy for Krugman to skip doing most of the homework on this topic.
This is simply not true. We are all using a lot of online content for free. Web3 means to harness the use of content to pay the content makers. For people who would have unquestioned copyrights but the Digital Millennial Copyrights Agreement has denied. Meaning when you see images, read stories, hear music on Google and FB etc etc…the transmission of that content is free for use and free from major online companies paying the creators.
To sell the content created the creators need online venues. Web3 is developing as systems that will validate views and pay content creators.
Could you elaborate on that? Because it doesn’t seem like crypto is either necessary or sufficient to make that work.
You don’t need crypto to require payment before someone can see images or read stories - just put them behind a paywall (hi, NYT and OnlyFans and Substack and any number of similar sites). If you put it on the web for free, anyone can point to it - and crypto/blockchain isn’t likely to change that. And crypto doesn’t really help ensure that only people who have paid to see the content will get to see the content (hi, “right-click” copying of all those Apes, Bored or Mutant or otherwise). In fact, since most NFT’s don’t transfer any rights to the copyrights of the underlying works, it’s not at all clear how Web3 is going to do anything to change the status quo.
But perhaps you could explain how it will?
Albaby
You don’t need crypto to require payment before someone can see images or read stories - just put them behind a paywall
Easily said and not at all a reality for millions of artists, animators, musicians, writers around the world. Citing the NYT is not proof of anything. The NYT does not produce novels. Novels are read in part online for free all the time. Worse when a price is offered for a novel by Amazon there is no control of the markup for the author. The NYT determines its price for the online subscriber. Worse yet for the authors in a digital form they can not sell the manuscript as an original.
It is easy to say what you did but without access to cryptos, in particular Eth, many artists starve while producing intrinsically valuable art under today’s digital conditions. If it was your ox you’d think otherwise.
More importantly Krugman’s argument is at best not informed.
It is easy to say what you did but without access to cryptos, in particular Eth, many artists starve while producing intrinsically valuable art under today’s digital conditions. If it was your ox you’d think otherwise.
Could you explain how, exactly? How does crypto enable an artist to get paid in a way that they wouldn’t be able to get paid in the absence of crypto?
Albaby
In fact, since most NFT’s don’t transfer any rights to the copyrights of the underlying works, it’s not at all clear how Web3 is going to do anything to change the status quo.
But perhaps you could explain how it will?
The NFT in a database is transferred for viewing. That is validated using Web3 tools. A token is issued in competition for more viewed content in one system I have studied. The tokens will have value on an exchange. Because there is such demand among content creators this system may have major traction with them. This is in its infancy.
I may have to set up a competing system with my partners. I wont go into more specifics of which Web3 companies I am looking at. Our internal plans I can not openly discuss.
The NFT in a database is transferred for viewing. That is validated using Web3 tools. A token is issued in competition for more viewed content in one system I have studied. The tokens will have value on an exchange. Because there is such demand among content creators this system may have major traction with them. This is in its infancy.
But how does that actually apply to what we’re talking about?
The NFT isn’t the artwork. It’s (at most) owning the web address for the artwork. When someone buys an NFT, they are (generally) not buying either the artwork nor any rights in the artwork. The scarcity/value lies entirely in the NFT, not the artwork associated with it - which is why most of the graphics associated with the larger NFT collections are just cartoons, with a sizable chunk just algorithmically generated variations on a theme (like all those Apes).
Albaby
I can not fully disabuse your ideas on the NFT not being the artwork without tipping my hand on the Web3 plans we have.
Skipping that then. You are of course more than free to believe whatever.
The reasons for the cartoons are cultural. The 45 and under crowd have spent far more time in front of tv screens etc and in front of cartoons to much higher ages. When many of us gave up cartoons much earlier in our developments. Their aesthetic is the cartoon. Then there are the copycats as with all artists through the ages. A lot of that gets no value in the marketplaces.
There is valuable art well beyond cartooning. The 3D animations can have a lot of value.
The dow is a weighted average…so how much real money has been spent on the Dow? It is non fungible. There really is no one value to say how much.
Seems like it would be pretty easy to find out the amount of invested capital (personal and/or VC) plus the IPO and possible secondary offerings for any stock.
But this would be missing the fact that the company “generated” additional value (profits and products) beyond all that.
One could see how mining bitcoins has a cost and buying bitcoins has a cost. I’m not seeing the additional generated “value” that must have some tulip sauce included in the long term.
Mike
Mike,
You’d be adding up numbers for decades. LOL
Then subtracting the bankruptcies at some fictious number.
The real response also has to have a caveat that your number fully depended on the US Treasury creating more and more of a money supply. Something the gold folks here are not so keen on, seeing it as bull.
There is valuable art well beyond cartooning. The 3D animations can have a lot of value.
I don’t question that. There is a lot of valuable art - and there is a lot of art that is not valuable. The reason I mention the cartoons that get linked to a lot of the NFT projects is to point out that most of the notable NFT’s (like the various incarnations of Apes and such) don’t seem to have art that’s especially “valuable,” except to the extent that the variations (like adding a pair of sunglasses or a nose ring) are very rare.
But that’s a little beside the point I was making, which is that NFT’s aren’t the artwork. Or at least, as I understand how they work:
Basically, the blockchain will create a registry of which people (or their accounts) are linked to a particular piece of art. That’s the NFT - being listed on the blockchain as linked to the art. It doesn’t convey any ownership of the art, and it doesn’t convey any ownership of the copyright in the art. It’s just a listing in a digital “book” with your name next to the name of the piece of art. You can sell your spot in that “book” to another person, and then they would have their name/account there instead of you - but they also wouldn’t have any ownership in the art or the copyright to the art. Just their name in the registery.
Some NFT’s are structured in a way that purports to grant an ownership right in the artwork, or even the copyright - but all of that is done off the chain, and doesn’t necessarily run with transfer of the NFT. To transfer the rights and obligations in that off-chain agreement, you’d need to formally assign the agreement to the new purchaser - irrespective of the NFT.
Is any of that wrong? If not, what does the NFT bring to the table?
Albaby
The protections and backstops are not there to a great degree because we’re still in the Wild West stage of this. They’ll appear over time if cryptocurrency proves useful. Things evolve.
I’ve heard that, but there are a couple problems with that line of thinking. One is that creating backstops and protections requires centralization and oversight. But decentralization is the raison d’être for cryptocurrency.
The other problem is that cryptocurrency can’t become widely accepted until it is at least as useful as fiat money. But crypto can’t become useful until it is widely accepted. In the Flexa example, besides the limited network of merchants that accept it, you can only deposit crypto but can’t withdraw it, and there are spending limits on your own money. That’s much less useful than regular fiat transactions. So it is unlikely anyone who doesn’t currently use crypto will ever use Flexa because there is no advantage to the consumer.
The root of this at first is Ethereum’s NFT contracts that allow digital content creators to establish higher value “originals”, if you will.
I don’t think that is possible. The value of anything, literally anything, is what a willing buyer will pay to a willing seller. The only thing that can change “value” is willing buyers and willing sellers. The medium of exchange can’t do it. Oh, and this is independent from any expenses in the transaction - the willing buyer still knows the total price they are willing to pay including all expenses. Same for the willing seller - they know the net price they want to receive for what they are selling.