All of vbuterin's Comments + Replies

I'm referring to bitcoin specifically, as I was specifically trying to determine whether or not it's a good idea to hold BTC right now. I'm obviously more bullish than 5% on "future blockchain technology that replaces it" (such as Ethereum or others)"; if I wasn't I would not be a full-time member of the industry :)

If you do that you can change the equation from Bitcoin winning and continuing to have value, versus the blockchain technology succeeding and some instance of it continuing to have value.

But then, the question becomes: if you're bullish in blockchain tech, but not bitcoin, then why not invest exclusively in the other blockchain tech and not bitcoin?

Maybe -- that entirely depends on whether BTC actually has value and that hinges on, as you put it, "maintaining constant salience" which is the real issue.

Okay, this helps. So "will BTC be able to (i) maintain constant salience, and (ii) be countercyclical in the long term, and if it does what value will it have?" seems like the object level issue; definitely makes things clearer than some abstract notion of replacing gold.

Ah I think I've been misunderstanding you. I was thinking in terms of the probability distribution over BTC's l... (read more)

Well, most any kind of asset has some diversification value. I see no particular reason for BTC to be countercyclical (not to mention that the traditional business cycle of the late XX century seems to be dead at the moment, or at least much transformed) and in any case there's too little data to tell. And if you think BTC has some extra special value because it will be {un|low|negatively} correlated to the S&P then you need to compare it to a different reference class. With respect to the probability distribution, no, you were right the first time -- we're both talking about the probability distribution of the value of 1BTC at some long-term point (and you really should define what does "long-term" mean here, in years, for obvious reasons). I'm not talking about hyper- or meta- distribution of your credence.

Quantum computers actually will not kill bitcoin. It'll take a significant coordination, but it'll survive:

Now, P = NP will kill bitcoin. But I rate that risk as being much lower than scifi gold mining techniques.

Yes, post-quantum cryptocurrency can be built using Lamport signatures or, I think more likely, a full-fledged post-quantum public key system. But would such a hard fork still be "bitcoin"? Will there be enough coordination to make the jump? Why bet on it? Added: in other words, you have now switched to an argument of the form: this community will respect property rights, which is exactly opposite to the technical argument you started with. Also, it's not just about Shor's algorithm. Grover's algorithm is a big deal. The advent of quantum computers will dramatically concentrate the pool of hashing power into few hands. I'm not sure what will happen, but I think that there is a good chance that the value of existing cryptocoins will be wiped out, even though the technology will be resurrected after quantum computers become widespread.

Thanks, I think this might actually be the argument I was looking for.

Whether the Bitcoin markets are efficient enough to worry about this is an open question

Right, so now the question is one of, does this idea of adverse selection actually apply?

I suppose one reformulation of the point made in the article is: if I believe X will happen with probability 5%, then I do not necessarily want to bet on X at 4.99% and bet against X at 5.01%, because it could be that my confidence is low enough that the very fact that someone wants to bet for or against me wi... (read more)

I think the way to go here is to assemble a larger set of potentially comparable cases. If you keep finding yourself citing different idiosyncratic distinctions (e.g. Bitcoin was the only member to be not-overblown AND have a hard cap on its supply AND get over 3B market cap AND ...), this suggests that you need to be more inclusive about your reference class in order to get a good estimate.

Indeed, I am aware. Though now a black swan supply event of that kind is rare, since we've already explored all the low-hanging fruit on earth, hence why exotic stuff like space mining, nanotech mining or nuclear transmutation may need to be involved. But I suppose something similar to this oil event: could also happen right here on our own planet.

A comparison to precious gems might be instructive. It used to be that sapphires and rubies were treasure and now they are just a kind of transparent stuff to put over your watch face or an LCD...
The point is that a black swan supply shock need not have any effect on the price.

Right, I agree, my 5% $34000 is only slightly Pascalian. I'm only using the Pascal reference because it is the best representative example I know of the general class of such scenarios (note that other "Pascalian" scenarios of this type are fairly common in the investment world; every startup crank loves throwing out the whole "if you think there's only a 0.1% chance I'm right, you'll get an EV of $100b 0.001 = $100m" line). If you know of a better name for the category, please share. I also used the Drake Equation as an analogy elsewhere in that r/buttcoin thread; perhaps that might be a better fit.

I'm not sure what a better term would be. Maybe 'lottery tickets', but that is still too low probability/high reward for what we are talking about.

In the West the predominant store-of-value right now is financial securities (stocks and bonds).

Mostly, yes. But gold still has a $7t market cap. But this does open up an interesting argument: that gold is on the whole dying as a store of value and it's being propped up almost entirely by tradition; in this case central bank gold holdings will probably decline 90%+ over the next century. In this scenario, BTC has no chance to replace gold because there's no new interest in gold anyway.

However, I would still argue that there is diversification value in ... (read more)

I think this is a reasonable assumption to work under. Maybe -- that entirely depends on whether BTC actually has value and that hinges on, as you put it, "maintaining constant salience" which is the real issue. Ah, so $34K is your 5% (or 3%) quantile for the distribution, right?

And what exactly is the reference class that you put Bitcoin into?

Roughly speaking, assets which have received a major amount of public attention and whose store-of-value functionality is the dominant factor in their price. Gold, silver, land and internet domain names are the only others I can think of that vaguely fit there.

So your argument is that gold has a very very large network effect? Reasonable I suppose, but technology has disrupted similarly entrenched things over the past two decades, so you have to add a lot of fundamental uncertainty.


... (read more)
Don't think land (which is productive and "consumable" -- in the sense that you can live on it) fits in here. I am also not sure that silver has much store-of-value role nowadays. In different times in different societies the store-of-value function was fulfilled by different things. For example, right now empty housing is a major store-of-value in China. US dollar banknotes are a notable store-of-value around the world, e.g. in Russia. Government bonds, especially of reputable governments, are often used as store-of-value. All in all it's fairly complicated and context-dependant :-) In the West the predominant store-of-value right now is financial securities (stocks and bonds). But I wonder why are you focusing solely on the store-of-value function, you don't think Bitcoin will be valuable as a medium of exchange? Depends on the resources brought against you, threat model still matters. Huh? I don't understand that. And, by the way, what is your point estimate? A mean? A median? Mode, maybe? :-)

So a wager is about a positive outcome, but there is a standard knockdown argument saying that the wager argument is incorrect precisely because of the possibility of negative outcomes, ie. G' sending you to hell for worshipping G, if it turns out the G' and not G is real. A mugging is about avoiding a negative outcome, but my proposed argument shows how not cooperating with the mugging can also avoid a negative outcome. Bitcoin is actually a third category: investing in BTC has a probability of a very positive outcome, but it is not the case that either (... (read more)

The superrational strategy is indeed to switch to B with some probability approaching 0.5 (or, if the system allows it, vote for A with 51% of one's capital and for B with 49% of it).

So, I did not forget about that particular case. In my particular brand of cryptoeconomic analysis, I try to decompose cooperation incentives into three types:

  1. Incentives generated by the protocol
  2. Altruism
  3. Incentives arising from the desire to have the protocol succeed because one has a stake in it

I often group (2) and (3) into one category, "altruism-prime", but here we can separate them.

The important point is that category 1 incentives are always present as long as the protocol specifies them, category 2 incentives are always present, but th... (read more)