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Comment by civilized | Hacker News Reader

I am not a crypto lover by any means, but this article is centered around a meaningless gimmick. No insight is gained by making up an incoherent concept, the zero coupon perpetual bond, and declaring cryptocurrency an instance of this concept. It's just "crypto is a scam" for those who fancy themselves financial sophisticates because they know basic interest formulas.

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Notably, obviously we can't value cryptocurrencies as bonds because then they would be worthless. Even the most ardent cryptosceptic would have to admit that a bitcoin is worth something, just as a memento of being part of the fun. Even if the exchange rate is 10k bitcoin/pizza.

It would be like valuing gold as a bond and determining the value is 0. The value is higher than that because the value isn't in a coupon.

Also, ironically, I suspect a zero-coupon bond would probably be worth something because it is likely that some central bank would happily overpay for it in a crisis.

Zero coupon bonds exist, they work by being sold at a discount eg just making this up, a $1000 bond might be sold at $950 for 1 year term. So you pay $950 now and get $1000 in a year.

Nobody said they didn't. The article details that.

What's claimed not to exist is a Zero Coupon Perpetual Bond. A bond that never matures and pays no interest.

Of course then the article claims crypto is this type of bond. It's a mathy financial jargon gimmick argument.

> A bond that never matures and pays no interest

A modern printed dollar note perhaps does this. The perpetual part requires the government to not cancel the note, which occurred in India and Europe in past couple decades.

Germany actually recently sold negative coupon bonds, i.e a buyer of this bond would pay more upfront than the maturity value.

https://www.reuters.com/article/germany-auction/update-2-ger...

I think you will find even mild cryptocritics think cryptocurrencies are worthless.

It's addressing what you get for "investing" (buying and holding) a cryptocurrency. Do you get coupons? No. Do you get a return of principal? Also no. Do you get an equity-like interest? No, that would make it an unlicensed security.

(Someone is arguing that there are cryptos that do pay coupons, which invites my favourite question: who's taking the other side of that trade?)

What do you get for investing in the US dollar or the Japanese yen?

People don't invest in those per se, they trade them or swap them for debt-like instruments at the first opportunity.

Nobody is buying and holding dollars?

Compared to T-Bills or various sorts of money market funds, the amount of just holding dollars for investment (rather than for cashflow needs of a business) is tiny.

One might say the same about cryptocurrency.

Fewer dollars or yen than you had yesterday?

As others have pointed out, there are lots of things that are not bonds and therefore have no value when you try to analyze them as bonds. Potatoes, for example, do not pay interest or return principal, because they are not bonds.

If cryptocurrencies were marketed as bonds, it would be reasonable to point out that they do not pay interest or return principal. But no one thinks cryptocurrencies are bonds, just like no one thinks cryptocurrencies are potatoes.

Pointing out that cryptocurrencies completely fail at being potatoes due to their lack of starch has about the same value as this article.

Potatoes are a commodity, you can eat them. They are not a financial asset.

I think, some people actually toyed with the idea of government zero coupon perpetuals in the mid-2010s when thinking about ways to counter deflation while rates are already at zero or negative.

I don't understand. Do you have any reasoning to back up your assertions?

Since the article author provides zero evidence for their claim, the OP's statement is reasonable.

Did the author? I mean by the very limited definition, aren't all "things" I buy at the store fitting of that description? Why does anyone buy anything at the store when it doesn't pay you interest and will never have a maturity date that you can be paid back?

Several people seem to think I'm comparing the comment with the author. I don't know how to ask for an explanation more simply.

The things you buy at the store are not financial assets

It’s a broken analogue in the first place, because bonds are debt instruments and cryptocurrency is not a debt instrument. The author also does not seem to know that blockchains do have economic activity and transaction fees that can form the element of interest or free cash flow. As a stretch, the article comparison could be made for a stock that never pay dividends, like Uber. It is still an interesting comparison, nevertheless,

The "zero coupon perpetual bond" is meaningless because it has nothing to do with a bond, ie. there is no exchange of wealth for income.

If you take the only two defining features of a concept and remove them both then you're left with something meaningless.

A zero coupon perpetual bond is obviously pointless. It's just a fancy way of saying "let's enter into a financial agreement where you pay me money and I will never pay you anything back, neither interest nor principal". The concept doesn't exist outside the author's head because there is no circumstance under which anyone would need the concept. If you want to give someone money and never get anything back, you don't need a bond.

Cryptocurrency, on the other hand, is at least potentially valuable, if people find a way to use it to do real things. Which they have: for example, it is used extensively for remittances in countries with unreliable financial systems.

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