Graham🐝 Edwards en Professions, Workers, Careers, Directors and Executives, Entrepreneurs Consulting Principal • GPEStratagem 11/3/2018 · 1 min de lectura · +800

Cryptocurrency — an exercise in semantics

As I continue to build an understanding of Blockchain technology I can't help but run up against it's partner in crime — cryptocurrency. It's something inherently vital if Blockchain is going to be used in a a decentralized way (either to disrupt a current trust institution or support an ecosystem). Simply put, cryptocurrency is the reward for engagement and effort, and it is something that can be assigned value. 

Cryptocurrency — an exercise in semanticsIt is important to understand that you can have a Blockchain without cryptocurrency but you can never have a cryptocurrency without Blockchain — they are two very separate things. Blockchain can be a very difficult concept to grasp and even harder to understand from a technical perspective, whereas cryptocurrency is equated to as money and much easier to align your thinking with. You can exchange two Bitcoin for US dollars and buy a car; it's something easy to understand, as well as captures the imagination of making great wealth.

Recently I was having a conversation with a successful investor and entrepreneur (an intrinsic value investor to be specific, and a student of Benjamin Graham and Warren Buffet); in our conversation it came up that I was on a sojourn to understand Blockchain technology. Ultimately the blockchain conversation became a discussion about cryptocurrency and investing. I mentioned that someone ask me if they should invest in cryptocurrency and my answer was if you have to ask me then the answer is "no".

He then looked at me and said, "Speculate. The term is speculating. You don't invest in cryptocurrency"

Investing* — in simple terms it refers to purchasing an asset with the hope that it would yield income in the future. Investments can be made in a number of forms depending on the investment return the investor requires and the risk that he is willing to take. 

Speculating* — the taking of higher risk and standing the possibility of losing all money invested. Speculation is similar to gambling and entails a very high risk that an investor may loose all his money or make very substantial returns if his speculation turns out to be correct. However, it must be noted that speculation is not exactly the same as gambling, because a speculator will take a calculated risk whereas gambling is more of a decision made on chance.

He went on to say that if a "Speculator" came into his office to discuss cryptocurrency he would entertain the discussion because there are many very successful speculators. Although if an "Investor" came into his office to discuss cryptocurrency the conversation would be very short — as an intrinsic value Investor cryptocurrency simply did not align with his investment thinking because it is impossible to calculate an intrinsic value. For me it was good we had this little talk.

So this is what I know about cryptocurrency —
  • I would rather be discussing Blockchain.
  • If you want to be involved with cryptocurrency you are by definition a "Speculator".
  • If you speculate in cryptocurrency you must be prepared to loose all of your money.
  • If you are building an ecosystem using Blockchain technology cryptocurrency is vital.
  • Cryptocurrency isn't going away anytime soon.

As I said, it was a good little talk.


* Definitions from  

Graham🐝 Edwards 14/3/2018 · #6

#4 I agree @Phil Friedman.... I see speculation more like "poker" opposed to the slot machine. Again I don't gamble, not because i don't know but mostly it saves a lot of time if I just burn my money — sadly I have no luck. : )

Nick Mlatchkov 12/3/2018 · #5

Ecosystem & crypto-currency are 2 totally contradicting terms. If intertwined they'd plant an inevitable conflict ...

Phil Friedman 11/3/2018 · #4

The interesting thing, @Graham🐝 Edwards, is that I think we agreeon the facts (for the most part) but disagree at times on what they mean. For example, we agree that crypto-currency is not going away any time soon, but as I see it, that does not mean the particular crypro-currency that you’re holding at any given time won’t collapse.

So too, I agree with your differentiation between investing and speculating, but I see all soeculation as strongly akin to gambling — because you’re betting on your holdings appreciating in value SOLELY on the basis of a rise in itrational demand. Which is true of both traditional equities these days AND crypto-currencies alike. It’s been a long time since stock buyers worried about earnings and dividends and appreciation of hard assets. Cheers!

+2 +2
Jerry Fletcher 11/3/2018 · #3

#2 Phil, I won't hold my breath. As I think you pointed out the Ponzitos are valued in US Dollars so why do they keep talking about eliminating the middleman?

Phil Friedman 11/3/2018 · #2

#1 @Jerry Fletcher, I do. I just don’t understand why blockchain participants need to be paud in Ponzitos rather than fiat currecy. Other than that the originator of the particular blockchain involved wants to pay in scrip that he or she can simply “print” at will. Thanks for the tag. Am seding you 1,000 Ponzitos which I anticipate will be worth US$1M by the end of 2018. Cheers!

Jerry Fletcher 11/3/2018 · #1

@@Phil Friedman thought you might like this.