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It's all obvious in retrospect... isn't it? Just like those HBS people who shoot down Bezos when he spoke about Amazon. Thing is: common sense is right most o

It's all obvious in retrospect... isn't it? Just like those HBS people who shoot down Bezos when he spoke about Amazon. Thing is: common sense is right most of the times. Most of the times BTC fad just dies out, most of the times Amazon never makes it to the point when they find the real cash cow of the company (AWS) and move from being a glorified Ebay to a 1.8T company

mustafa_pasi 5y ago
A lot of people got into Bitcoin early as well, but tried to build the wrong things. For example I built an ebay clone in 2013. It was never obvious at all. Practically all predictions were wrong. Even the predictions by bitcoin advocates of all stripes were wrong. Everyone was wrong. It is just that some people won big despite being wrong. I don't think Brain Armstrong foresaw that Bitcoin would turn into what it is today either. In any case, building an exchange seems pretty hard. I wouldn't know where to start with all the legal stuff.
- thathndude 5y ago
  This is obvious just by looking at the labels. We continue to call these cryptocurrency, and that was what Armstrong saw. But in practice the only narrative that gets any real traction (and makes any sense) for BTC is the digital gold narrative and store of value.
  - ObserverNeutral 5y ago
    People are scared as hell of inflation and that's why the Fed was created. The "stable prices" thing is an elegant way to say "prevent inflation". Now people are really upset that the Fed won't allow deflation and is pretty much encouraging inflation. They see this as a betrayal to the public and the reason why the Fed was created in the first place. There is a misalignment between the Fed inflation preference of 2% and the public inflation preference which is 0% or even -2% Enter BTC: what draws people to crypto is deflation. People love deflation, they gravitate towards crypto because deflation is hard built in protocol and it brings about financial nirvana for the saver: that is being able to increase one's net worth without doing any tangible work, manual or intellectual.
    - maxwell 5y ago
      How much deflation is good? The point of Friedman-style 2% inflation seems to be to steadily, but not abruptly, drive up prices, increasing wages, increasing demand. I see the personal, anti-social case for "giving in to our greed", as the time traveler put it [1], but what are the social benefits of lowering production, wages, demand? 1. https://www.reddit.com/r/Bitcoin/comments/1lfobc/i_am_a_timetraveler_from_the_future_here_to_beg/1 https://www.reddit.com/r/Bitcoin/comments/1lfobc/i_am_a_time...
      - ObserverNeutral 5y ago
        The time traveler post is really great . But the most absolutely bit is the "giving in to our greed" : "Why didn't we abandon Bitcoin, and move to another system? Well, we tried of course. We tried to step over to an inflationary cryptocurrency, but nobody with an IQ above 70 was willing to step up first and volunteer. After all, why would you voluntarily invest a lot of your money into a currency where you know your wealth will continually decline? The thing that made Bitcoin so dangerous to society was also what made it so successful. Bitcoin allows us to give into our greed." The whole social benefits thing that we somehow had up to now was pure luck. If bitcoin hodlers keep a low profile and don't spend there would not be any way to identify them and redistribute wealth. This is especially true for those who mined btc.
        deleted 5y ago
        [deleted]
- base698 5y ago
  Not everyone was wrong. Hal Finney called it early as pointed out in "The Bitcoin Standard". > While this view of Bitcoin might sound like it is a betrayal of Bitcoin's original vision of fully peer‐to‐peer cash, it is not a new vision. Hal Finney, the recipient of the first Bitcoin transaction from Nakamoto, wrote this on the Bitcoin forum in 2010: Actually there is a very good reason for Bitcoin‐backed banks to exist, issuing their own digital cash currency, redeemable for bitcoins. Bitcoin itself cannot scale to have every single financial transaction in the world be broadcast to everyone and included in the block chain. There needs to be a secondary level of payment systems which is lighter weight and more efficient. Likewise, the time needed for Bitcoin transactions to finalize will be impractical for medium to large value purchases. Bitcoin backed banks will solve these problems. They can work like banks did before nationalization of currency. Different banks can have different policies, some more aggressive, some more conservative. Some would be fractional reserve while others may be 100% Bitcoin backed. Interest rates may vary. Cash from some banks may trade at a discount to that from others. George Selgin has worked out the theory of competitive free banking in detail, and he argues that such a system would be stable, inflation resistant and self‐regulating.
  - mustafa_pasi 5y ago
    He is still talking about a situation where people are trying to use Bitcoin as a currency and the technical challenges they'd face in that scenario. Bitcoin as currency did not fail because of technical issues. It failed because the financial incentives to use it as such are not there.
- agumonkey 5y ago
  There's something very weird about this, since birth there were many beliefs (BTC will succeed when ATMs will be in bitcoin) that people followed, most of them ended up false but BTC and it's crowd is still going. Out of the wrong emerged a new true.
est31 5y ago
HBS people were right. Amazon was successful because Bezos had access to investor money and was able to make losses for years and years, building up market share in the process. Most of the times, people don't have such access.
- ObserverNeutral 5y ago
  Maybe you are mistaking Amazon for Tesla. Amazon was all about re-investing the extra revenues over costs. Bezos wasn't very popular on Wall St. for this strategy...or at least less popular than he'd have otherwise been.
  - est31 5y ago
    Yeah it was sold as re-investing but had they not done it, maybe a competitor that did it would have won instead. As for not being popular on Wall St... he got outside money so he couldn't be that unpopular.
- jariel 5y ago
  During the 1990's that would have been uncommon, but not today. Just the opposite, the amount of money chasing 'money losing operations' is extraordinary. Most high flying startups today that have working capital needs (like 'food delivery') run at a loss in perpetuity with the backing of entities like SoftBank picking up where public markets used to. I wouldn't dismiss how hard it is to get something like that off of the ground, but once it is, it's almost comical how badly you can screw up and still get money. 'Sonder' formerly 'Flatbook' spent years screwing everything up, they continue to screw up, but because they had a basis of a critical mass and some basis of operations, they've continually been able to get investors to hand over to a net money losing operation that doesn't look like it will have the scale to work. So this issue is relevant to the overall 'Coinbase' picture because we're living in an era of tremendous liquidity, never really before seen in human history, and due to COVID, basically government/central-bank backed guarantees of money and credit. There's no real precedent for what we're doing right now.
  - 5y ago
jariel 5y ago
It's not obvious at all. Cryptos provide no value to the world at least today, and consume tremendous amounts of energy, it's probably a net negative. Amazon has clearly some externalities, but it's obviouos that people 'want stuff' and they dominated on the industry shift to e-commerce. Amazon will probably be around for a while, selling useful stuff to people. If Crypto dissipated tomorrow, or by the stroke of a pen were made 'illegal' - the world wouldn't skip a beat. Nothing would change. A bunch of people who invested in 'Digital Baseball Cards' had them burned up in a fire but who cares. Nothing material to the economy has changed - other than some money changed hands for said 'Digital Baseball Cards'. So Coinbase is not obvious in hindsight, and the kinds of valuation and leverage going on are not obvious either. I suspect that 'Financial Populism' will remain and Coinbase will be around in one way or another, but they are in a different territory than most other new companies. "common sense is right most of the times." <- there is basically no 'common sense' in crypto, or rather 'common sense' would imply that the value of crypto is still 'potential'. Since we don't actually use crypto for anything, but it is really cool and 'could be used', then 'common sense' would indicate we value it for it's potential and not much more. Valuing things that have no material value in the order of 100's of billions is the opposite of common sense, I think future historians will probably wonder what we were thinking.
- ObserverNeutral 5y ago
  The same arguments you make against Crypto can be made against Central Banks and I'd say governments in general. There are institutions which only exist because humans project themselves into the future and imagine the consequences that they'd suffer because of adverse events and they create institutions to protect them against such events. People are scared as hell of inflation and that's why the Fed was created. The "stable prices" thing is an elegant way to say "prevent inflation". Now people are really upset that the Fed won't allow deflation and is pretty much encouraging inflation. They see this as a betrayal to the public and the reason why the Fed was created in the first place. There is a misalignment between the Fed inflation preference of 2% and the public inflation preference which is 0% or even -2% Enter crypto: what draws people to crypto is deflation. People love deflation, they gravitate towards crypto because deflation is hard built in protocol and it brings about financial nirvana for the saver: that is being able to increase one's net worth without doing any tangible work, manual or intellectual. You can try to remove it but efforts will fail and it will take a whole lot of effort just to prevent it from getting bigger. The government pretty much gave up on removing drugs, cash, tax evasion.. Crypto is the same thing, great for the individual, but very bad for society. Tragedy of the commons can't be solved , so the work is to contain because they can't extinguish it. Better yet it can be extinguished but it would require government to do the one thing it can't possibly do: A similarly deflationary dollar
dkrich 5y ago
The thing is, I still don’t feel like the vision as stated is proven. I still haven’t heard a single person explain in cogent terms the value it provides and IMO if you can’t explain something that is supposedly a revolutionary technology and the utility it provides in simple terms you don’t understand it. It’s also curious to me how the fiat skeptics/crypto bulls always cheer when crypto trades up in fiat terms. I’m not the type to conflate funding with utility, and while clearly there is massive interest in crypto, it’s still not clear to me that the entire space is more than just a speculative asset class. I don’t know anyone who uses it to purchase goods, in fact it seems that the bull case for it is that it shouldn’t be spent. Now that it’s gone from $20k to $60k in four months everyone suddenly believes in it. The absolute mania that has coincided with the price ascent alone makes me skeptical. It’s easy to cast aside naysayers when you see such a massive IPO amidst a speculative frenzy like we’re seeing in crypto and say “see, you’re wrong” but I think skepticism is healthy in certain cases and people buying coinbase and crypto now thinking they’re early to this party just feels like a suckers rally. Companies that are IPOing these days are doing so after having been private for a decade. This results in early investors cashing out on the public markets after capturing the opportunity when the risk was still massive.
- ObserverNeutral 5y ago
  People are scared as hell of inflation and that's why the Fed was created. The "stable prices" thing is an elegant way to say "prevent inflation". Now people are really upset that the Fed not only won't allow deflation but it is pretty much encouraging inflation. They see this as a betrayal to the public and the reason why the Fed was created in the first place. There is a misalignment between the Fed inflation preference of 2% and the public inflation preference which is 0% or even -2% Enter crypto: what draws people to crypto is deflation. People love deflation, they gravitate towards crypto because deflation is hard built in protocol and it brings about financial nirvana for the saver: that is being able to increase one's net worth without doing any tangible work, manual or intellectual. That's the value of Crypto, people have lost faith in the Fed. BTC gives people what they want (hard coded deflation) and has an amazing marketing story.
  - 5y ago
IkmoIkmo 5y ago
> It's all obvious in retrospect... isn't it? Not sure. In fact, I invested in bitcoin some 8 years ago, just like Brian Armstrong I was optimistic about bitcoin not as a popular speculative eccentric store of value, but as the standard for digital money that would drive substantial portions of global finance. That hasn't materialised at all. If I could see the number of merchants accepting bitcoin and their effective average turnover paid in bitcoin, the number of business to business transactions in bitcoin, the amount of loans being issued in bitcoin, remittance etc, 13 years after launch, today... I'd certainly not have invested in bitcoin or Coinbase, in retrospect, with the information today. That's the crazy thing, and even with this new attention, I still haven't seen anything exciting around the corner. All price increases are now purely speculative, instead of changes in functionality or use.

mustafa_pasi 5y ago

A lot of people got into Bitcoin early as well, but tried to build the wrong things. For example I built an ebay clone in 2013. It was never obvious at all. Practically all predictions were wrong. Even the predictions by bitcoin advocates of all stripes were wrong. Everyone was wrong. It is just that some people won big despite being wrong. I don't think Brain Armstrong foresaw that Bitcoin would turn into what it is today either. In any case, building an exchange seems pretty hard. I wouldn't know where to start with all the legal stuff.

thathndude 5y ago
This is obvious just by looking at the labels. We continue to call these cryptocurrency, and that was what Armstrong saw. But in practice the only narrative that gets any real traction (and makes any sense) for BTC is the digital gold narrative and store of value.
- ObserverNeutral 5y ago
  People are scared as hell of inflation and that's why the Fed was created. The "stable prices" thing is an elegant way to say "prevent inflation". Now people are really upset that the Fed won't allow deflation and is pretty much encouraging inflation. They see this as a betrayal to the public and the reason why the Fed was created in the first place. There is a misalignment between the Fed inflation preference of 2% and the public inflation preference which is 0% or even -2% Enter BTC: what draws people to crypto is deflation. People love deflation, they gravitate towards crypto because deflation is hard built in protocol and it brings about financial nirvana for the saver: that is being able to increase one's net worth without doing any tangible work, manual or intellectual.
  - maxwell 5y ago
    How much deflation is good? The point of Friedman-style 2% inflation seems to be to steadily, but not abruptly, drive up prices, increasing wages, increasing demand. I see the personal, anti-social case for "giving in to our greed", as the time traveler put it [1], but what are the social benefits of lowering production, wages, demand? 1. https://www.reddit.com/r/Bitcoin/comments/1lfobc/i_am_a_timetraveler_from_the_future_here_to_beg/1 https://www.reddit.com/r/Bitcoin/comments/1lfobc/i_am_a_time...
    - ObserverNeutral 5y ago
      The time traveler post is really great . But the most absolutely bit is the "giving in to our greed" : "Why didn't we abandon Bitcoin, and move to another system? Well, we tried of course. We tried to step over to an inflationary cryptocurrency, but nobody with an IQ above 70 was willing to step up first and volunteer. After all, why would you voluntarily invest a lot of your money into a currency where you know your wealth will continually decline? The thing that made Bitcoin so dangerous to society was also what made it so successful. Bitcoin allows us to give into our greed." The whole social benefits thing that we somehow had up to now was pure luck. If bitcoin hodlers keep a low profile and don't spend there would not be any way to identify them and redistribute wealth. This is especially true for those who mined btc.
      - deleted 5y ago
        [deleted]
base698 5y ago
Not everyone was wrong. Hal Finney called it early as pointed out in "The Bitcoin Standard". > While this view of Bitcoin might sound like it is a betrayal of Bitcoin's original vision of fully peer‐to‐peer cash, it is not a new vision. Hal Finney, the recipient of the first Bitcoin transaction from Nakamoto, wrote this on the Bitcoin forum in 2010: Actually there is a very good reason for Bitcoin‐backed banks to exist, issuing their own digital cash currency, redeemable for bitcoins. Bitcoin itself cannot scale to have every single financial transaction in the world be broadcast to everyone and included in the block chain. There needs to be a secondary level of payment systems which is lighter weight and more efficient. Likewise, the time needed for Bitcoin transactions to finalize will be impractical for medium to large value purchases. Bitcoin backed banks will solve these problems. They can work like banks did before nationalization of currency. Different banks can have different policies, some more aggressive, some more conservative. Some would be fractional reserve while others may be 100% Bitcoin backed. Interest rates may vary. Cash from some banks may trade at a discount to that from others. George Selgin has worked out the theory of competitive free banking in detail, and he argues that such a system would be stable, inflation resistant and self‐regulating.
- mustafa_pasi 5y ago
  He is still talking about a situation where people are trying to use Bitcoin as a currency and the technical challenges they'd face in that scenario. Bitcoin as currency did not fail because of technical issues. It failed because the financial incentives to use it as such are not there.
agumonkey 5y ago
There's something very weird about this, since birth there were many beliefs (BTC will succeed when ATMs will be in bitcoin) that people followed, most of them ended up false but BTC and it's crowd is still going. Out of the wrong emerged a new true.

est31 5y ago

HBS people were right. Amazon was successful because Bezos had access to investor money and was able to make losses for years and years, building up market share in the process. Most of the times, people don't have such access.

ObserverNeutral 5y ago
Maybe you are mistaking Amazon for Tesla. Amazon was all about re-investing the extra revenues over costs. Bezos wasn't very popular on Wall St. for this strategy...or at least less popular than he'd have otherwise been.
- est31 5y ago
  Yeah it was sold as re-investing but had they not done it, maybe a competitor that did it would have won instead. As for not being popular on Wall St... he got outside money so he couldn't be that unpopular.
jariel 5y ago
During the 1990's that would have been uncommon, but not today. Just the opposite, the amount of money chasing 'money losing operations' is extraordinary. Most high flying startups today that have working capital needs (like 'food delivery') run at a loss in perpetuity with the backing of entities like SoftBank picking up where public markets used to. I wouldn't dismiss how hard it is to get something like that off of the ground, but once it is, it's almost comical how badly you can screw up and still get money. 'Sonder' formerly 'Flatbook' spent years screwing everything up, they continue to screw up, but because they had a basis of a critical mass and some basis of operations, they've continually been able to get investors to hand over to a net money losing operation that doesn't look like it will have the scale to work. So this issue is relevant to the overall 'Coinbase' picture because we're living in an era of tremendous liquidity, never really before seen in human history, and due to COVID, basically government/central-bank backed guarantees of money and credit. There's no real precedent for what we're doing right now.
- 5y ago

jariel 5y ago

It's not obvious at all. Cryptos provide no value to the world at least today, and consume tremendous amounts of energy, it's probably a net negative. Amazon has clearly some externalities, but it's obviouos that people 'want stuff' and they dominated on the industry shift to e-commerce. Amazon will probably be around for a while, selling useful stuff to people. If Crypto dissipated tomorrow, or by the stroke of a pen were made 'illegal' - the world wouldn't skip a beat. Nothing would change. A bunch of people who invested in 'Digital Baseball Cards' had them burned up in a fire but who cares. Nothing material to the economy has changed - other than some money changed hands for said 'Digital Baseball Cards'. So Coinbase is not obvious in hindsight, and the kinds of valuation and leverage going on are not obvious either. I suspect that 'Financial Populism' will remain and Coinbase will be around in one way or another, but they are in a different territory than most other new companies. "common sense is right most of the times." <- there is basically no 'common sense' in crypto, or rather 'common sense' would imply that the value of crypto is still 'potential'. Since we don't actually use crypto for anything, but it is really cool and 'could be used', then 'common sense' would indicate we value it for it's potential and not much more. Valuing things that have no material value in the order of 100's of billions is the opposite of common sense, I think future historians will probably wonder what we were thinking.

ObserverNeutral 5y ago
The same arguments you make against Crypto can be made against Central Banks and I'd say governments in general. There are institutions which only exist because humans project themselves into the future and imagine the consequences that they'd suffer because of adverse events and they create institutions to protect them against such events. People are scared as hell of inflation and that's why the Fed was created. The "stable prices" thing is an elegant way to say "prevent inflation". Now people are really upset that the Fed won't allow deflation and is pretty much encouraging inflation. They see this as a betrayal to the public and the reason why the Fed was created in the first place. There is a misalignment between the Fed inflation preference of 2% and the public inflation preference which is 0% or even -2% Enter crypto: what draws people to crypto is deflation. People love deflation, they gravitate towards crypto because deflation is hard built in protocol and it brings about financial nirvana for the saver: that is being able to increase one's net worth without doing any tangible work, manual or intellectual. You can try to remove it but efforts will fail and it will take a whole lot of effort just to prevent it from getting bigger. The government pretty much gave up on removing drugs, cash, tax evasion.. Crypto is the same thing, great for the individual, but very bad for society. Tragedy of the commons can't be solved , so the work is to contain because they can't extinguish it. Better yet it can be extinguished but it would require government to do the one thing it can't possibly do: A similarly deflationary dollar

dkrich 5y ago

The thing is, I still don’t feel like the vision as stated is proven. I still haven’t heard a single person explain in cogent terms the value it provides and IMO if you can’t explain something that is supposedly a revolutionary technology and the utility it provides in simple terms you don’t understand it. It’s also curious to me how the fiat skeptics/crypto bulls always cheer when crypto trades up in fiat terms. I’m not the type to conflate funding with utility, and while clearly there is massive interest in crypto, it’s still not clear to me that the entire space is more than just a speculative asset class. I don’t know anyone who uses it to purchase goods, in fact it seems that the bull case for it is that it shouldn’t be spent. Now that it’s gone from $20k to $60k in four months everyone suddenly believes in it. The absolute mania that has coincided with the price ascent alone makes me skeptical. It’s easy to cast aside naysayers when you see such a massive IPO amidst a speculative frenzy like we’re seeing in crypto and say “see, you’re wrong” but I think skepticism is healthy in certain cases and people buying coinbase and crypto now thinking they’re early to this party just feels like a suckers rally. Companies that are IPOing these days are doing so after having been private for a decade. This results in early investors cashing out on the public markets after capturing the opportunity when the risk was still massive.

ObserverNeutral 5y ago
People are scared as hell of inflation and that's why the Fed was created. The "stable prices" thing is an elegant way to say "prevent inflation". Now people are really upset that the Fed not only won't allow deflation but it is pretty much encouraging inflation. They see this as a betrayal to the public and the reason why the Fed was created in the first place. There is a misalignment between the Fed inflation preference of 2% and the public inflation preference which is 0% or even -2% Enter crypto: what draws people to crypto is deflation. People love deflation, they gravitate towards crypto because deflation is hard built in protocol and it brings about financial nirvana for the saver: that is being able to increase one's net worth without doing any tangible work, manual or intellectual. That's the value of Crypto, people have lost faith in the Fed. BTC gives people what they want (hard coded deflation) and has an amazing marketing story.
- 5y ago

IkmoIkmo 5y ago

> It's all obvious in retrospect... isn't it? Not sure. In fact, I invested in bitcoin some 8 years ago, just like Brian Armstrong I was optimistic about bitcoin not as a popular speculative eccentric store of value, but as the standard for digital money that would drive substantial portions of global finance. That hasn't materialised at all. If I could see the number of merchants accepting bitcoin and their effective average turnover paid in bitcoin, the number of business to business transactions in bitcoin, the amount of loans being issued in bitcoin, remittance etc, 13 years after launch, today... I'd certainly not have invested in bitcoin or Coinbase, in retrospect, with the information today. That's the crazy thing, and even with this new attention, I still haven't seen anything exciting around the corner. All price increases are now purely speculative, instead of changes in functionality or use.