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Comment by ZeroGravitas | Hacker News Reader

One of the things that came out of climate change was the concept of the "inevitable policy response".

Basically if you recognize that coal is poisoning people for no societal benefit, then it can carry on via momentum for a while, insiders can prop it up for longer than it should, but eventually it'll get crushed and you don't want to be holding the bag when it does.

As far as I can tell, that applies to most crypto. I'm sure there's cool uses, but mostly it seems a way for people to make money from the people who will be caught out when it shuts down.

So the obvious question is, how do you do a 'big short' on this?

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Coal is a bad analogy because coal also generates a lot of energy and has uses in chemistry and metallurgy, and those things create real value.

The problem with coal is that its externalities are not properly priced in, making it look quite a bit cheaper than it actually is. Much of its cost is being placed on a hidden credit card with an unknown interest rate. If all externalities were priced in coal would probably not be competitive except in places with few other good energy options and in roles where it's hard to replace like bulk virgin steel production.

Crypto has few real value-creating uses outside the original core use cases of easier international wire transfer, some utility in areas without functional banking, black/grey market commerce, and hobbyists/techno-nerds who use it because its cool. Those use cases are real but they are also the use cases that existed in 2008-2009 when Bitcoin launched.

Web3, ICOs, and DeFi all seem to be almost 100% gambling and scams. Every few months I go looking for systems and use cases for crypto other than the original ones mentioned above and all I find is gambling and scams.

I don't think crypto will go to zero, but I think its actual value is very far below its current price. FOMO marketing for various forms of web3 and token shonk is getting increasingly shrill and desperate, which is not a good sign. If I had any of this stuff I'd sell.

Of course remember: it's very hard to call the top of these things. They almost always go higher than anyone expects. Sub-prime mortgages kept going far beyond what anyone thought possible. Regardless, you don't want to be a bag holder when it eventually does crash.

The best way to win in a casino is not to play. The second best, if you've played, is to quit while you are up and ignore the fact that there is a chance it might go higher. Here's some good old fashioned Native American financial advice on this topic:

https://www.youtube.com/watch?v=KXbDB3uEltY

You aren't special. Someone will win big in the casino, but it won't (statistically) be you.

There's a core good idea at the heart of the NFT hoopla. Or at least I would say there's a core very interesting/powerful idea there. That is -- you can bake in an enforceable mechanism where the original seller gets an X percent cut of future sales.

The current implementations are often broken. Downstream sales can skirt the royalty. But that is, like many problems with crypto, a solvable engineering problem.

I call this primary-sale royalty a "good" idea because it seems like an obvious, almost intuitive way to benefit original artists. And it also just clears out mountains of regulation and royalty regime that currently track, enforce and account for royalties, and do a terrible job of it.

The problem is, you can use the same mechanism for anything, such that rich people can bake in an "I continue to get richer" royalty whenever they sell their property.

Both the good and bad side of this mechanism are just one thing you can do with programmable money. Does anybody think it's the only one -- the only new mechanism worth developing?

I agree. The problem is that the bad chases away the good.

This is the problem with everything in crypto. There's so much scamming, crime, gambling, and other bullshit that legitimate artists have become wary of the entire ecosystem.

Do you want to live in a bad neighborhood? Same principle works in markets. When a market or market venue gains a reputation for being full of crap, legitimate players don't want to be associated with it. It doesn't matter how brilliant it is.

One of the problems with cryptocurrency is that it's a product of technical people who think everything is a technical problem. A lot of it is technically brilliant, but they overlook the social, political, and economic angle.

I often argue that Bitcoin was actually hacked very quickly. It wasn't hacked by targeting the cryptographic algorithms or the software but via social engineering. It was hacked by targeting people with scams and schemes. As with other security systems the humans are often the least secure part of the system. People are much easier to target than algorithms and code unless the latter has some serious zero-day or is just grossly insecure by design.

Don't try to short a fraud. You'll get squeezed.

The more conventional phrasing is, "the market can remain irrational longer than you can remain solvent."

I'm old enough to remember the SCO vs IBM Linux lawsuit. My dad tried to short it. He couldn't even do so. There were too many shorts already. Later lots of those shorts got squeezed. The whole thing did eventually go to zero but it took a while and few actually made money shorting it.