Cryptocurrencies

[Dave86ch]

This is a great overview on web3

 

https://preethikasireddy.com/post/the-architecture-of-a-web-3-0-application

[Longnose]

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• I have read most the threads about Bitcoin and other Crypto stuff on this forum. I know that the general sentiment for Crypto is negative. But I wanted to ask and see if we have any closet crypto/blockchain bulls on this forum?

 

Over Thanksgiving I took it upon myself to explore down the crypto rabbit hole purely from an educational / wanting to understand how it works perspective. This stemmed from a conversation with a friend who is very bullish on the space. My perspective has always been that I believe there is significant value to blockchain technology and potentially crypto currencies. But as a self proclaimed value investor I don't know how to quantify a value to any of it so I just steer clear of it.

 

After exploring down the rabbit hole. I am now even more convinced that the blockchain technology & potentially crypto will be a massive part of the future of commerce. All this said I do think that cryptos are in quite a bubble. It definitely has trends that look similar to the dot.com era. People saw the internet and said this is the future and everyone was dumping money into all sorts of websites that have virtually no value. Crypto is similar where 90% of the projects have no value. But things like Bitcoin and Ethereum are laying infrastructure that will likely support the future of blockchain technology. There likely could be a bubble pop that could resemble the dot.com pop where Something like AMZN went from $100 in 99' to $7 in 01'. 

 

Has anyone looked at alternative ways to play in the blockchain/crypto space? I recently saw Jack Dorsey is resigning from Twitter to focus solely on SQ and is going hard on BTC integrations. I've also been a long term fan of what SQ has been providing small business. 

 

Anyways, I'm not looking to create a controversial thread but wanting to know if anyone else sees any of the positives that will come from this technology. Also, if anyone has identified "safer" ways to play crypto / blockchain tech besides speculating on coins/mining?

 

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TwoCitiesCapital

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Posted 13 hours ago

You can get high single percentage yields in stablecoins on services like Celsius and BlockFi. I've mentioned these in other threads, but the reception to them has been less than warm. Feel free to PM me if you want more info.

 

Beyond that, I'm not a closet bull. I've spent the last 2 years accumulating up to ~20% of my networth in crypto. Mostly in BTC, but some in ETH and other DeFi related tokens and have been pretty open about being super bullish on BTC over the long-term. There is another crypto thread here though so maybe we keep the conversation to that one? 

 

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SharperDingaan

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• Member
• •  4.3k

Posted 2 hours ago

This thread would be better were it moved to one of the other crypto threads, but to speak to the question.

 

There is NO safe crypto investment, the reality is that you have to deal with risk - measured as expected return/volatility.

Generally, the longer the holding period the less risk  For most, an investment via an crypto ETF will be better than a direct investment. Look at the Purpose ETF's, those paying a monthly dividend, and a 2-5 year hold. Professionally managed, cash returning capital every month, a double in 2 years producing a double digit CAGR.

 

Most would expect BTC's price to materially rise, once the 21M cap is reached. Simply because buyer/seller will be splitting the mining cost and paying in Satoshi - every 1/100 of a US cent increase in the price of a Satoshi, increases the price of a BTC by USD 10,000. That's the real 'bull' case - everything else is largely noise.

 

A 100K outlay values at maybe 400K in 5 years.

If you receive 6%/yr for 5 years (30K), maybe 70K at risk at the end of year 5

Payoff? 400/70, or 5.71x ........ to simply sit on your ass and do nothing

 

SD

 

Moving the conversation to this thread per the recommendation. 

 

@SharperDingaan This is a kind of what I was expecting. I have a little portfolio exposure to BTC and a few ETH based tokens at the moment. But am treating it with the set it and forget it mindset. The volatility doesn't bother me. But I guess I don't want to be over exposed if a bubble pops. 

 

@TwoCitiesCapital I am interested in knowing more about what the services you mentioned. Celsius and Blockfi. Ill shoot you a PM. 

 

I've been poking around with yield farming and staking some ETH based project tokens. Anyone else playing with that?

 

 

[rkbabang]

1 hour ago, Longnose said:

I've been poking around with yield farming and staking some ETH based project tokens. Anyone else playing with that?

 Years ago I participated in the Tezos (XTZ) IPO.  I've been staking it for the last few years and have earned quite a bit more.  It's free money, so why not?   I also have a little ETH2 staked at Coinbase.

[Fly]

On 12/14/2021 at 11:53 AM, Longnose said:

I've been poking around with yield farming and staking some ETH based project tokens. Anyone else playing with that?

 

Check Barnbridge out, they have some pretty interesting products:

 

https://barnbridge.com

 

[TwoCitiesCapital]

11 minutes ago, ValueArb said:

 

A 60x BTC return in the next 10 years would give it a market cap of roughly $50 trillion dollars. In todays real terms, that would be about double the US GDP, and half of World GDP.

 

Even 20x would put it close to US GDP.

 

Quoted from the returns thread. I think 60x is unlikely over that time outside of an extreme bubble. But 10-15x seems reasonable. 

 

Consider there is currently ~15 trillion of negative yielding debt globally. 

 

There is ~10 trillion in gold as an investment vehicle (not including silver or platinum also precious metals vehicles). 

 

There is ~300+ trillion in global real estate. 

 

If Bitcoin is successful at becoming a store of value, it can take a portion of any of these markets.

 

If it becomes a unit of account and global currency, then you can throw the trillions of global fiat in there as well as another market to displace/take from. 

 

It is not unrealistic or crazy for to me to think the market cap of BTC will exceed US GDP at it's peak of we assume it's success as a global store of value and payments network. 

 

 

[Longnose]

1 hour ago, TwoCitiesCapital said:

 

Quoted from the returns thread. I think 60x is unlikely over that time outside of an extreme bubble. But 10-15x seems reasonable. 

 

Consider there is currently ~15 trillion of negative yielding debt globally. 

 

There is ~10 trillion in gold as an investment vehicle (not including silver or platinum also precious metals vehicles). 

 

There is ~300+ trillion in global real estate. 

 

If Bitcoin is successful at becoming a store of value, it can take a portion of any of these markets.

 

If it becomes a unit of account and global currency, then you can throw the trillions of global fiat in there as well as another market to displace/take from. 

 

It is not unrealistic or crazy for to me to think the market cap of BTC will exceed US GDP at it's peak of we assume it's success as a global store of value and payments network. 

 

 

Second this. 

 

Personally, The more I play with DEFI the more I want it mainstream. I want to hold my money and my assets in wallet and not in some middle man banking system. I want to connect to exchanges and make transactions there that are between me and the other party and not feeling like I am relying on 4 middle parties to make sure my money is backed by gold somewhere and that the assets and labilities are coming up and down on separate banking ledgers. 

 

I want to find companies that are focusing and leveraging the potential of these technologies though. Im curious more about SQ now that Dorsey has dropped twitter and is focusing on SQ and changed the name to Block and is working more in the crypto space. This company has real revenues and could seriously make waves. 

 

[SharperDingaan]

We take a similar view.

AliPay and WePay are getting hit because DCEP is gaining traction and breaking up the oligopoly - yet very few investors in these two stocks seem to recognize that. In China the receiver pays the payment transaction fee, and both payer/receiver rely on the credit of the payment providers. With DCEP there are no fees and PBOC is the guarantor.

 

With less fee income coming in as DCEP adoption accelerates,

what do you think happens to AliPay and WePay 

 

SD

[rkbabang]

15 hours ago, TwoCitiesCapital said:

15 hours ago, ValueArb said:

 

A 60x BTC return in the next 10 years would give it a market cap of roughly $50 trillion dollars. In todays real terms, that would be about double the US GDP, and half of World GDP.

 

Even 20x would put it close to US GDP.

 

Quoted from the returns thread. I think 60x is unlikely over that time outside of an extreme bubble. But 10-15x seems reasonable. 

 

Yes, 60X would be extreme bubble territory for sure, that's why I put it on the high end.  15X is a no brainer, 20+X is my target.  If anything close to 60X becomes reality then it would be difficult to even know for sure what the gains were as this would be an extreme bubble combined with a Bitcoin-took-over-everything scenario where most of the fiat currencies no long exist and there wouldn't even be an equivalent to the US Dollar to measure it against.

 

[Longnose]

Does BTC have many DEFI projects going on? I honestly haven't played much in the BTC ecosystem other than owning some BTC. 

 

I've been playing with AVAX and ZIL quite a bit and am now delegating both. AVAX has lots of DEFI projects on its chain that I quite like and I feel they are attempting to solve some of the issues that ETH has weaknesses with. 

 

I've heard good things about Solana but haven't played with their stuff yet. 

[TwoCitiesCapital]

16 minutes ago, Longnose said:

Does BTC have many DEFI projects going on? I honestly haven't played much in the BTC ecosystem other than owning some BTC. 

 

I've been playing with AVAX and ZIL quite a bit and am now delegating both. AVAX has lots of DEFI projects on its chain that I quite like and I feel they are attempting to solve some of the issues that ETH has weaknesses with. 

 

I've heard good things about Solana but haven't played with their stuff yet. 

 

The most recent upgrade to the BTC network allows for smart contracts. It remains to be seen how that will develop - my understanding is Ethereum still has more functionality - but we should start seeing DeFi solutions underpinned by BTC in the future. 

 

I believe companies like Stacks and Sovryn are some of the bigger developers in the space but not 100% certain since this is new territory for BTC. 

 

How it will compare to ETH? I dunno. As someone who has been involved in DeFi on ETH for a year or so now, it's frustrating that it costs $100-200 to do anything. I've basically been inactive since August because it's not economic for me to even claim the rewards I'm making. You can have 30-40k wrapped up in it and it still not be worthwhile after considering fees to deposit/withdraw/claim/trade etc. 

 

The lightning network offers promising scaling solutions to keep activity small activity off-chain for BTC. Stacks is also running a parallel chain that has final settlement on BTC layer so it seems like the developers are already building in scaling solutions where ETH is still trying to migrate there with complex sharing and roll-ups. 

Edited January 7, 2022 by TwoCitiesCapital

[Longnose]

Good info! I'll be curious what BTC spits out in the DeFi realm. 

 

The whole reason I've actually steered clear of ETH is the transactional costs you mentioned. Which is why I've migrated towards AVAX. They are trying to solve transaction times, cost, and cross chain compatibility issues that are common in the ETH network. I believe SOL is doing similar to AVAX here but still haven't played with them. Also, AVAX has lots of DeFi projects on their chain. I love messing with the DeFi stuff so that's where I've been spending time. 

 

I know i listened to a really good podcast on lightning network stuff with BTC a while back. I'm also quite curious about this as well and have thought of taking it as a homework action to set up my own lightning BTC node and play with the lightning network. 

 

https://www.theinvestorspodcast.com/bitcoin-fundamentals/bitcoin-full-nodes-instant-settlement-on-the-lightning-network-w-btc-sessions/

[SharperDingaan]

It is not just whether it is 15-60x, it is also how long it takes to get there.

If your ROE (CAGR) is 12%, it takes 6 years to double, and four (1->2, 2->4, 4->8, 8->16x) doublings to get to 16x - about 24 YEARS! (4x6 yrs). If you think a decade is a more reasonable timeframe, you are doubling every 2.5 yrs (10/4 doublings), and compounding at 28%/yr (72/2.5). Most would not see that as unreasonable ....... yet HW and WEB have CAGR's in the 15-20% range (17.5% average) - and you think you can do 1.6x that (28/17.5) ??? 

There is a reason for the disconnect 

 

BTC is currently at USD 42K, at 16x it needs to be USD 672K in year 10.

Or 1 Satoshi at 6.7 tenths of a cent - at a time when buyer/seller are splitting the cost of an update between them.

A mind-set thing, not a valuation thing - and the younger you are the better. 

 

Different PoV.

 

SD

 

 

 

 

[KJP]

1 hour ago, TwoCitiesCapital said:

 

As someone who has been involved in DeFi on ETH for a year or so now, it's frustrating that it costs $100-200 to do anything.

 

That is another issue I've tried to think through.  I realize people are trying to build solutions to lower transaction costs and improve speed, and other chains are designed for higher throughput (e.g., Solana), but from a dapp designer/user perspective, don't they all have diseconomies of scale, because more usage will always lead to higher gas fees?  Or put another way, doesn't an increasing amount of value over time flow to the protocol layer, rather than the dapp ecosystem? 

[TwoCitiesCapital]

1 hour ago, KJP said:

 

That is another issue I've tried to think through.  I realize people are trying to build solutions to lower transaction costs and improve speed, and other chains are designed for higher throughput (e.g., Solana), but from a dapp designer/user perspective, don't they all have diseconomies of scale, because more usage will always lead to higher gas fees?  Or put another way, doesn't an increasing amount of value over time flow to the protocol layer, rather than the dapp ecosystem? 

 

Does all economic value flow to the fossil fuels that allow for it to occur? Sure a ton of value will flow to ETH, but I don't think it means it captures all of the value. At some point, ETH becomes too expensive and activity slows. What is the value of ETH if there's no activity on the network?   

 

The only real solutions here seem to be increasing centralization to lower costs.  Roll-ups, side chains, sharding, etc all have some facet of increased centralization to them. Bitcoin isn't immune from this either as Lightning network is what makes small transactions feasible (large ones are still dirt cheap on chain). 

 

The L2 roll-ups and side chains in ETH do dramatically lower transaction costs, but it's expensive to get into L2 and expensive and time consuming to get off of L2 so you've really just changed the type of fee you're paying.

 

Also, with various L2 providers, there's been a drop in composability as the L2 services don't necessarily work nicely with one another like everything did when directly on ETH chain. All remains to be seen if ETH can work all of this out, but I view the recent decisions to make ETH deflationary and encourage the lock up of the bulk of its supply for the proof-of-stake upgrade to have been shooting itself in the foot. It just artificially pumped the price, made on-chain activity uneconomic, and gave competing solutions a foothold. 

Edited January 7, 2022 by TwoCitiesCapital

[K2SO]

21 minutes ago, TwoCitiesCapital said:

The only real solutions here seem to be increasing centralization to lower costs.  Roll-ups, side chains, sharding, etc all have some facet of increased centralization to them. Bitcoin isn't immune from this either as Lightning network is what makes small transactions feasible (large ones are still dirt cheap on chain). 

Taking it to its logical conclusion we just end up back to V and MA networks which can do it all at a relatively low cost. 

I am a complete idiot when it comes to this but I have no idea how blockchains scale in any practical way without centralization, the bane of DeFi. 

Edited January 7, 2022 by K2SO

[KJP]

12 minutes ago, K2SO said:

Taking it to its logical conclusion we just end up back to V and MA networks which can do it all at a relatively low cost. 

I am a complete idiot when it comes to this but I have no idea how blockchains scale in any practical way without centralization, the bane of DeFi. 

 

Yes, this is the issue I was getting it.  Non-blockchain solutions have economies of scale.  Decentralized blockchain solutions appear to have diseconomies of scale that are solved by centralization.  But then what is the point of them in the first place?  Do they all transition from virtual machines/smart contracts/transaction processors to crypto stores of value with attached ledger, and we just continually create new chains to do the transactional work?

 

I realize that this is pretty unfair given that the tech is very new and alot of experimentation and trial and error needs to happen to figure out how to use the tech.  But I still like to think through these issues just to see whether my 50,000 foot view of the current state of play is correct.

[Dave86ch]

18 hours ago, Longnose said:

Second this. 

 

Personally, The more I play with DEFI the more I want it mainstream. I want to hold my money and my assets in wallet and not in some middle man banking system. I want to connect to exchanges and make transactions there that are between me and the other party and not feeling like I am relying on 4 middle parties to make sure my money is backed by gold somewhere and that the assets and labilities are coming up and down on separate banking ledgers. 

 

I want to find companies that are focusing and leveraging the potential of these technologies though. Im curious more about SQ now that Dorsey has dropped twitter and is focusing on SQ and changed the name to Block and is working more in the crypto space. This company has real revenues and could seriously make waves. 

 

Exactly the same feeling, I can literally built my personal bank vault in Solidity with few line of code. With more expertise I could implement more features, the potential is huge.

Atm the problem to solve is gas cost but we are at the beginning.

DAO is another interesting project.

Edited January 7, 2022 by Dave86ch

[TwoCitiesCapital]

39 minutes ago, KJP said:

 

Yes, this is the issue I was getting it.  Non-blockchain solutions have economies of scale.  Decentralized blockchain solutions appear to have diseconomies of scale that are solved by centralization.  But then what is the point of them in the first place?  Do they all transition from virtual machines/smart contracts/transaction processors to crypto stores of value with attached ledger, and we just continually create new chains to do the transactional work?

 

I realize that this is pretty unfair given that the tech is very new and alot of experimentation and trial and error needs to happen to figure out how to use the tech.  But I still like to think through these issues just to see whether my 50,000 foot view of the current state of play is correct.

 

I think there is some middle ground - particularly with the advent of DAOs. 

 

Having a centralized side-chain isn't a big deal if the leadership/ownership of that side-chain is decentralized across 1000+ different entities/individuals via a DAO. So I'd be ok with more centralization of the Blockchain aspects as long as control of those entities was still decentralized. 

 

Further, there could just be more sophisticated logic for things that don't require immediate execution. Like a withdrawals and deposits to Aave and Curve and Yearn and etc don't have to be instantaneous for those with patience to wait. Why not allow for logic that would batch orders every few hours to be sent to the chain as a single transaction with one gas fee instead of thousands of independent ones. This lowers network congestion (overall gas fees) and then spreads that smaller gas fee across multiple parties and doesn't require sidechains or increasing centralization. Yearn already does this inside of their vaults but not for transactions to get into and out of the vaults. 

 

These would be simple implementations in the short term - but we're just not seeing it yet for whatever reasons. 

Edited January 7, 2022 by TwoCitiesCapital

[Longnose]

25 minutes ago, TwoCitiesCapital said:

 

I think there is some middle ground - particularly with the advent of DAOs. 

 

Having a centralized side-chain isn't a big deal if the leadership/ownership of that side-chain is decentralized across 1000+ different entities/individuals via a DAO. So I'd be ok with more centralization of the Blockchain aspects as long as control of those entities was still decentralized. 

 

Further, there could just be more sophisticated logic for things that don't require immediate execution. Like a withdrawals and deposits to Aave and Curve and Yearn and etc don't have to be instantaneous for those with patience to wait. Why not allow for logic that would batch orders every few hours to be sent to the chain as a single transaction with one gas fee instead of thousands of independent ones. This lowers network congestion (overall gas fees) and then spreads that smaller gas fee across multiple parties and doesn't require sidechains or increasing centralization. Yearn already does this inside of their vaults but not for transactions to get into and out of the vaults. 

 

These would be simple implementations in the short term - but we're just not seeing it yet for whatever reasons. 

 

This sounds similar to what I think ZIL is trying to do. They call it creating shards. But it sounds similar to what you are describing and ultimatlely all the shards periodically sync to validate that the chain is correct.

[ValueArb]

23 hours ago, TwoCitiesCapital said:

 

Quoted from the returns thread. I think 60x is unlikely over that time outside of an extreme bubble. But 10-15x seems reasonable. 

 

Consider there is currently ~15 trillion of negative yielding debt globally. 

 

There is ~10 trillion in gold as an investment vehicle (not including silver or platinum also precious metals vehicles). 

 

There is ~300+ trillion in global real estate. 

 

If Bitcoin is successful at becoming a store of value, it can take a portion of any of these markets.

 

If it becomes a unit of account and global currency, then you can throw the trillions of global fiat in there as well as another market to displace/take from. 

 

It is not unrealistic or crazy for to me to think the market cap of BTC will exceed US GDP at it's peak of we assume it's success as a global store of value and payments network. 

 

 

 

Thanks, I have to admit that you blew my mind with that fact that gold has a $10 trillion dollar market cap. If I had known this when I last owned BTC, I probably would have kept it and bought more at $400. I remember trying to justify that it would be worth more but at the time $8B seemed like a huge amount.

[Krapdivad]

Biller Miller had a very good interview about his investment in bitcoin which is 50% of his personal leveraged account
 

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

 

summarized it here 

https://docs.google.com/document/d/1mBHXgrGJeB_dJ2qct0ZsVchyKSnZqrns2JUmMMXbbXw/edit

[KJP]

Interesting essay on some highly centralized aspects of the current state of Web3:  https://moxie.org/2022/01/07/web3-first-impressions.html

 

In the context of DeFi, I think the maxim "people don't want to run their own server" can be translated to "people don't want to be their own custodian."  That's not universally true, but I think it's generally true in Western countries and will continue to be unless there are major failures of traditional custodians or people get sufficiently concerned that their government can (and would) lock them out of the financial system, a la what happened to women once the Sons of Jacob took over in The Handmaid's Tale.

[TwoCitiesCapital]

3 hours ago, KJP said:

Interesting essay on some highly centralized aspects of the current state of Web3:  https://moxie.org/2022/01/07/web3-first-impressions.html

 

In the context of DeFi, I think the maxim "people don't want to run their own server" can be translated to "people don't want to be their own custodian."  That's not universally true, but I think it's generally true in Western countries and will continue to be unless there are major failures of traditional custodians or people get sufficiently concerned that their government can (and would) lock them out of the financial system, a la what happened to women once the Sons of Jacob took over in The Handmaid's Tale.

 

This has generally been my argument as well. People won't want the learning curve or the personal risk so CeFi will have a place in the future. BlockFi/Celsius/Ledn/etc have carved out their space since traditional banks didn't want to do it. We'll see these companies do very well in years to come IMO. 

 

I do think there's still an appreciable minority that will want self custody (myself included) where multisig wallets, smart contracts, etc will be a thing but will probably largely be the institutional players doing so (much like futures and/or derivatives trading). 

[Longnose]

3 hours ago, KJP said:

In the context of DeFi, I think the maxim "people don't want to run their own server" can be translated to "people don't want to be their own custodian."  That's not universally true, but I think it's generally true in Western countries and will continue to be unless there are major failures of traditional custodians or people get sufficiently concerned that their government can (and would) lock them out of the financial system, a la what happened to women once the Sons of Jacob took over in The Handmaid's Tale.

 

I think we will get to a point where people wont realize the difference anymore. Eventually you'll be able to name your wallet like an email address.  Your money will be tied to whatever wallet you make. Potentially hardware wallets could get to the point where you buy the equivalent of a raspberryPI that has a software preloaded. Where you set up the wallets for your household. 

 

I guess there may always be the group that doesn't even want to do that but w/e. I think DeFi will become more and more mainstream over time. 

[thepupil]

Smart people tell me I should care about crypto…and I just really struggle to do so. 
 

this along with my hatred of Tesla is mainly because I’m a “small dicked fit wit”....

 

I think it in part stems from the fact that every time i've invested in silver and gold, i end up buying to sell other stuff that i like more and it's not a worthwhile activity for me because i never end up owning enough for diversification bennies and don't have the discpline to HODL something in whcih i have no conviction. 

Edited January 10, 2022 by thepupil