Thoughts on Tokens

https://medium.com/@balajis/thoughts-on-tokens-436109aabcbe

by mycodebreaks • 9 years ago

160 82 9 years ago

pdog2• 9 years ago

Beyond buying some Bitcoin and Ethereum, is there anything else a prospective investor should do?

Tokens in organizations that you think may succeed? I'm not particularly clear on details, i.e. how would you know whether a company is succeeding vs. just being a speculator's toy.

vernon99• 9 years ago

Ideally the organization itself should: a) be fully built on distributed technologies, if that's not the case, this is a clear red flag as it gives too much control to the founders to screw it. Ether+Web3.js+IPFS is a good combo. Proper voting/execution system for members is also a must IMO but very few actually have it. b) have a clear incentives model in place (built in smart contracts which code you should be able to inspect), meaning both initial users/contributors get increased value from participating and long-term growth can be achieved. c) solve a real problem, obviously. There're some existing models that can be disrupted as well as some of the more futuristic things like prediction markets, distributed clouds, etc. All of that should be explained in their whitepaper. That said, we're in a sort of 1999 situation right now so expect it to correct short-term. Also there's a lot of scammy projects now, so do your due diligence.

to3m• 9 years ago

Buy some Litecoin, of course.

aqsheehy4• 9 years ago

Have knowledge asynchronous from the market. If you're asking here you don't, so don't trade.

pdog2• 9 years ago

Do you invest in the stock market? Do you have "asynchronous" knowledge that the market doesn't know about?

Temasik• 9 years ago

Buy xrp

eigenvalue• 9 years ago

The best alt coins in my view are SiaCoin, Golem, and Steem.

redm• 9 years ago

I think it's safe to say that the entire market is currently being driven by speculation. If it had a volatility index, it would be through the roof.

WikipediasBad2• 9 years ago

This definitely feels like a bubble. But if anyone is interested in investing in some potentially cool tokens and projects, I personally think the most interesting ones are:

1. Tezos (not part of ethereum ecosystem) 2. Golem (part of ethereum) 3. Litecoin (they are pioneering the lightning + SegWit protocol first, before BTC, the price could rise dramatically if it's a success) 4. Dogecoin (this one is just fun and has been a cult classic since it came out, don't recommend anyone buying, just fun to add it to the list, much wow)

Disclaimer: I own no position in the above nor am I affiliated with any of them. These are just my opinions.

jurandom2• 9 years ago

Any thoughts on Augur/Gnosis? Those have a real use case in my opinion.

mifeng• 9 years ago

Are those just prediction markets or is there something else to them? I remember there was a site called TradeSports everyone was excited about in the early 2000s. It's problem was that there was very little liquidity for any bet other than presidential elections and the Super Bowl.

vosper• 9 years ago

Augur had been in development for quite a while and it seems to be going pretty slowly. I bought some REP in the crowd sale (which has gone up in value, with the rising tide), have been following along on the subreddit, and I'm not sure it'll ever have any use.

WikipediasBad2• 9 years ago

Prediction market tokens seem to be really popular. I am sure they will rise in value with the rising tide, but I am not extremely interested in them personally. I am not sure they can deliver on the utopia-like vision they claim to be able to deliver. If I were to buy something right now, I would purchase tezos, ether, and 1-2 of my favorite ether contract tokens. I am very weary though that this is a big bubble.

saurik• 9 years ago

http://gizmodo.com/reddit-users-lose-real-money-after-meme-c...

The dogetipbot website emphasized that the service was always free. Yet, somehow Mohland believed his creation could support a business model. He tried to get investors, but who would want to invest in dog meme tokens with no path to monetization?"
“Very lies, such betrayal, WOW.”
Now, Dogecoin will likely meet the fate of other altcoins, such as Titcoin, Auroracoin, or Namecoin. The greedy holders have no reason to ever divest, so the currency will be kept alive by the weird true believers in some godforsaken corner of the internet, where forgotten botnets and graphics cards mine blocks for the benefit of no one, until all the wallet passwords are finally forgotten. Though the currency began as a spoof of crypto culture, it was the same greed and delusional idiocy that has plagued more serious ventures like Bitcoin that struck the final blow.

MichaelGG• 9 years ago

Bad article. Turns out they raised several hundred K USD, and were hoping to run a tip/donation system for streamers and others that worry about being attacked, chargebacks, etc. It's not as stupid as the article makes it out. Though running off with user funds just adds the cryptocoin spin to it.

Geee• 9 years ago

More interesting ones are:

  - SiaCoin: Free market cloud storage
  - Lisk: Decentralized Javascript apps

lowglow• 9 years ago

I'm 100% bullish on tokens backing great projects and awesome people. I'm going to help bring to light some quality uses of them by both people and organizations.

wangii• 9 years ago

it's a power stuggle governments and central banks can't afford to lose. and it'll be a recurring scheme to rob those don't understand the stake. it's about who is/will be the monetary policy maker, governments/central banks, or the market controlled by speculators? what are the exact differences between gold and tokens?

isubkhankulov4• 9 years ago

However, when considered as an alternative to classic equity financing, token sales yield a >100X increase in the available base of buyers and a >1000X improvement in the time to liquidity over traditional methods for startup finance. The three reasons why: a 30X increase in US buyers, a 20–25X increase in international buyers, and a 1000X improvement in time-to-liquidity.

these token sales are successful because people who buy into them are selling off their profits from buying Ethereum (from $0.88 in Jan '16 to $193 today >2000% return). Its a diversification play of course. Look how much the DAO raised a year ago.

Its ridiculous that the adults in the room like A16Z, USV, Balaji are falling into hypnosis.

ICO's coming out have no product, no users, just a white paper and a nice website, with an ERC20 contract address for deposits.

If you talk to anyone buying these tokens, they all say the same thing, that they're buying to flip the tokens on Poloniex for a quick buck.

A recent example is Gnosis, which raised $12.5M by selling 4.17% of their tokens at $30 each during the 1st auction round. They started trading at $60-100 a week after the sale and now are trading above $200.

Look at the charts of coins delisted by Poloniex. immediate 50%+ drop. The value of these tokens is their liquidity. Take that away and you won't see these valuations.

For traditional VC's, if companies let their shares float on exchanges, the SEC mandates financials. These tokens are designed around hopes and dreams. Most certainly a bubble but more so a game of musical chairs, make some money while the music is still playing.

Bitcoin at the end of the day grew in price from speculation BUT it had a real use, albeit in the black market. It has grown from that since 2013 but not by much.

P.S. Token sales don't even give up equity. These people are paying millions for API keys they can't yet use? I don't think so.

jerguismi3• 9 years ago

These people are paying millions for API keys they can't yet use?

Comparing API keys to tokens is quite weird. I don't think they have almost anything to do with each other.

In general the blog text is pretty bad. It doesn't differentiate very well between tokesn and cryptocurrencies. Tokens are usually not mined but are more like shares in a company. Also many of these ICO's are very scammy, investors should be cautious.

isubkhankulov4• 9 years ago

Have you guys thought about adding ETH trading? or Monero/Dash?

arethuza2• 9 years ago

"I don't think they have almost anything to do with each other."

I read it as these tokens being transferable "right" to access some service. However, what I don't understand is why there would any reason for such tokens to appreciate in value unless there was some restriction on supply (which would damage the long term viability of the service) or some other benefit from buying in early.

Or you could treat them like bearer shares - whoever ever has the token has the equity. But that could presumably have a lot of legal issues - not least around transparency of ownership and control.

modeless• 9 years ago

Stopping investment scams like the current ICO bubble is exactly the reason the SEC exists. It is an absolute certainty that this party is going to end in regulation and it's also likely that a bunch of people will end up in jail. The only real question is how long it will take the regulators to figure out which one of them has jurisdiction here.

I say this as an early Bitcoin investor and current holder. Bitcoin was not a scam, but many of these ICOs are blatant cash grabs specifically designed to circumvent SEC rules about selling unregistered securities to non-accredited investors.

I'll also say that I think current SEC rules are too restrictive and to the extent ICOs represent Uber-like defiance of bad regulation, they could be a good thing. But a totally unconstrained ICO market bubble may be far too much of that good thing.

arthurcolle• 9 years ago

Completely agree with everything you're saying. I hope the SEC prosecutes any criminal activity that is found to be intended to take advantage of unsophisticated investors, but I don't think its appropriate to characterize ICOs as a cash grab as some have in this thread. I participated in the Ethereum pre-sale in 2013 and think ICOs in conjunction with the relatively new SEC regulation surrounding crowdsales (https://www.sec.gov/news/pressrelease/2015-249.html) could potentially facilitate new, organically-grown companies that reward individuals for their independent analysis of a project that they believe has value, irrespective of how much capital they have - people should be able to measure the risks they are willing to take, and exercise the judgment call accordingly. Currently regulatory limitations force potential investors with less capital to limit their participation in projects that they may want to have a stake in - I don't think that's fair.

I do think that there are some projects that have tremendous promise (more specifically in the Ethereum ICO space, since Bitcoin smart contracts are basically dead in the water at this time).

For example, Swarm City markets itself as a sharing economy platform (after the rebranding from Arcade City due to one of the founder's shady dealings), and intends to compete with the class of organizations with business models like Uber and Airbnb. While they have a ways to go in terms of developing the intended product to a level that could be acceptably called production-quality, this is exactly what decentralized applications could be used to build. The fact that Swarm City is trying to work through its earlier issues and still has active development/plans to release a real project is very promising, and shows that small-scale decentralized development can work in the real world. Whether a real product can be released remains to be seen, but I'm cautiously optimistic and advising my peers to just be really, really careful - especially as new highs are tested every single day.

Aeternity is another interesting project that builds on top of Ethereum but is focused on scaling and the issue of oracles right off the bat, which is something that is kind of brushed off as a trivial and minor detail, but that will really make or break these decentralized application platforms on the whole. The technical lead, Zack Hess, has experience working on cryptocurrency projects (@zack-bitcoin on GitHub) and I think its amazing that all this cryptoasset technology is enabling people to raise money easier than before.

While abuses need to be dealt with as swiftly and dramatically as the scale of the crimes deserves, it does seem a little hostile to characterize the class of these projects as completely fraudulent. But the valuations for some of these projects is just insane. People don't need two prediction markets valued at >$300m and a variety of distributed supercomputing platforms with no real-world use-cases this badly...

Jabanga4• 9 years ago

Claiming that adults making their own decision to buy the equivalent of a digital collectible, is a scam, and should be prohibited with long stretches of time in prison for those who take part, is why income disparity continues increasing [1], why the financial sector is dominated by a handful of corporate giants, and why it costs $6 million to do an IPO [2].

Attitudes like yours are not consistent with the principles of liberal democracy, which rest on the idea that we should be free to do with our body and property whatever we wish, as long as it violates no one's right to the same.

I've never touched a digital token, and I wouldn't touch one unless the landscape drastically changed, but I would never dream of wishing prison, or worse [3], for those who buy or sell tokens. Their money, their lives. What should the government create statutes to dictate how people spend their own money?

PS: bubble != scam

Calling something a scam is a very serious allegation should not be done lightly.

[1] https://www.brookings.edu/research/make-elites-compete-why-t...

[2] https://www.quora.com/How-much-does-it-cost-to-IPO

[3] https://www.theatlantic.com/politics/archive/2016/06/enforci...

livestyle3• 9 years ago

How is it a scam if there is instant liquidity right after the sale in most cases?

intev2• 9 years ago

This. I'm still shocked that reputable VC firms like a16z are completely throwing their weight behind cryptocurrencies without even a slight bit of skepticism.

I recently listened to an a16z podcast where they had on a founder of a blockchain hedgefund. It was enlightening to listen to them talk about all the various coins and all the use cases. Chris, in the interview, uses an analogy of this being similar to the beginning of the internet and how you could have invested in either companies or domain names, implying domains are much more of a sure bet. In their mind, buying coins is equivalent to buying domain names. I think this pretty much illustrates their whole view - either force make some bets and be seen as part of the pioneers or miss out and be seen as the late adopting skeptics.

But there are so many fundamental differences that I would argue it's not even in the same realm of similarity. For starters, there is rampant oversupply. Everyone is trying to get into blockchain and trying to initiate an ICO or trying to create their own blockchain. Then there's the actual lack of use cases for the majority of them. Even in the beginning of the internet one thing was clear - it was a breakthrough in how quickly information could be transmitted. It's not very clear what the obvious use case for blockchains are, though proponents will provide a long list of possible use cases.

Take Golem for example. On paper, it looks interesting - it's a token for computing power that's not based on a central controlling entity. So for this to even work there has to be some sort of SDK that "packages" computing work so that computers on the Golem network can ingest it. It's a given that SDK itself is a huge attack surface vector, making every computer on the network vulnerable to a bug that will eventually be found. On top of that, there will be the huge variations in computing power and capacity at any given time ensuring that any critical infrastructure cannot run on it. Let's say you run into a problem, and maybe your output was unexpected. How do you debug? Whom do you contact if things go wrong? I'm willing to bet most people will pay a little more for the benefit of having a central point of contact (like AWS).

There's also the argument for coins being used as "shares" of a company. This is probably the most dangerous use case. There's a reason why regulators exist. They were started to protect the interest of the common man (though now it can be argued they've lost their way but that doesn't mean the answer is to completely abolish them). What's stopping sophisticated scammers conducting fly by offerings and disappearing? It doesn't take much to create a top notch video and create "buzz" around something. This is like Kickstarter on steroids (in the worst possible way).

I'm interested in hearing why I'm wrong, so if you have arguments against any of my points, please reply. I really want to believe in all of this, because that seems like the right thing to do, but something in my brain isn't clicking.

NotUsingLinux• 9 years ago

So let's try this. Basically you are not "wrong" it's just about Belief and fiction.

Have you read the "sapiens" book? There is a good narrative in that book in that: religion, money and legal institutions are just fictions.

So I guess the question with tokens is : can we make up new fictions?

I think we can.

If you insist on "there is a reason why Regulator exist" , well I think it's not that reason you think it is.

The point is yes there is scam , see posts above. But yes there is also opportunity to find people who share similar ideas and values and express their common goals using tokens.

Does that make sense?

DiNovi• 9 years ago

Bitcoin has grown "not that much" from 2013 you say

SolarNet• 9 years ago

In actual usage, no not really. In bubble based investment, yes. I know people who run bitcoin ATMs, and who trade bitcoin for cash, they have seen only a marginal increase in activity over the last few years.

Bitcoin is a useful store of value, it provides ways to transmit value, the electronic equivalent of cash. But the use cases have not much improved, and so it's usage (outside of financial sectors) has not really grown (except the marginal increase of late-adapters in sectors where it is useful).

Financial sectors of economies are supposed to help manage the allocation of resources. What financial sectors make are the tools for economies. The bitcoin financial sector forgets this way too much. They don't actually make anything of real value. Which is why these bubbles happen, people are speculating bitcoin will be a great economic tool someday.

Except that bitcoin is loosing to other coins in features. As well as the trust of the people using it to produce actual value.

isubkhankulov4• 9 years ago

my exact language was "grown from that" meaning grown from the black market.

aqsheehy4• 9 years ago

Another ponzi pumping article on HN

ben_jones• 9 years ago

At least its happening here in the form of blog posts and not in a retirement home with phones ringing off the hook.

aqsheehy4• 9 years ago

Oh don't worry it's happening there too

harryh6• 9 years ago

To me the two most provocative points made in this essay are that tokens could be used to fund open source projects and that tokens could be used to distribute some of the value in large successful internet companies like Google & FB to early adopters. I don't see how this would work though.

I buy a token for some random open source project (say a unit testing library because they link to one as an example). And then what?

Or I buy a token in a new social network that eventually becomes very popular. What does that get me?

They don't connect the dots on these ideas at all & I really wish they did. As it is it sounds like they're trying to gloss over something that doesn't really make sense when you try to think it all the way through.

cryptonector• 9 years ago

Like all currencies and alike, they have to be exchangeable in order to be of any value.

brut2• 9 years ago

You can raise money by crowdsourcing without having to raise a single USD ever, fill forms, go through regulators and banks etc. It's not that you offer redeemable tokens. You just create a token and people buy it. Then you have money. That's how it works for at the moment.

jerguismi3• 9 years ago

I'm pretty sure that if you ask the regulators, they will have a different idea on how token crowdsales should be treated. Essentially they are very similar to a shares in a company. In the end when you sell those tokens you get BTC or USD, which pretty much should be treated as money if you ask the government.

wmf2• 9 years ago

I think the idea is that people have to spend the tokens to use the network and thus they buy tokens from early adopters. https://coincenter.org/entry/what-are-appcoins

harryh6• 9 years ago

Ya, I thought of that but that doesn't really make sense to me either. Open source projects tend to be free to use. Under this plan you need a token. Which costs money. That's a big change!

Kinda sounds like they're saying that if you change your open source project to a proprietary software project you can get people to pay for it. Now that may be true (for some projects at least) but that's fundamentally changing the nature of what it is you're building.

jerguismi3• 9 years ago

Tokens ban be used to fund anything, including open source projects. However the general trend seems to be that token crowdsales are just used to fund more token crowdsales, as it doesn't really make sense to do the work when you get the money up front.

skybrian• 9 years ago

I can sort of see it. Let's say you have a Kickstarter and the first 100 people get a ticket to a concert. If you give them an online token that works as a ticket, it's (in theory) more easily transferable, so they could exchange it online.

This is a way of creating an online secondary market with little infrastructure. It assumes you want to encourage it. (Unlike many artists who want to discourage scalpers.) You could imagine this sort of thing happening with any other credits, like game currency or frequent flyer miles. Something usable worldwide (unlike concert tickets) would have more value.

However, I don't know how many companies who will want to hand out credits that are exchangeable worldwide in this way, since you don't know who your customers are and there is little protection against abuse. It seems like there would be a lot of potential for money laundering as well.

But, if you're desperate to raise funds, it gets you money up front (much like Kickstarter) and speculation might result in raising money faster. On the other hand, it might reduce demand due to less "fear of missing out," since people might consider buying it later (much like they buy products on ebay).

What would open source projects could give people that they would want to buy? There are games and other product-oriented stuff, but most software isn't in that category.

It's ironic that a technology supposedly based on not having to trust anyone relies so much on trust. If the company doesn't deliver on whatever the tokens are supposed to buy, they become worthless.

LrnByTeach• 9 years ago

I buy a token for some random open source project (say a unit testing library because they link to one as an example). And then what? Or I buy a token in a new social network that eventually becomes very popular. What does that get me?

very good points, with no clear answers from these Cryptocurrency companies ..

laktek• 9 years ago

I guess for Open Source projects Tokens can be used as a way to filter support queries (position in the queue determined by the tokens you hold) and give voting rights (who have the power to drive the feature roadmap).

simonebrunozzi• 9 years ago

Shameless plug, I've written an extensive article on "how to handle your bitcoin investments in 2017", and I feel it answers many of the questions raised here, mostly about whether investing in crypto (BTC or else) makes sense, and how: https://medium.com/simone-brunozzi/how-to-handle-your-bitcoi...

dangerousbeans• 9 years ago

It's nice to have something a bit more meaningful than a mug from kickstarter though

runeks4• 9 years ago

Tokens based on forked chains and forked code. The most important example here is Ethereum Classic, which was based on a hard fork of the Ethereum blockchain that occurred after a security issue was used to exploit a large smart contract.

As far as I understand, this is the exact opposite of what happened.

After a flaw in a contract, on the Ethereum blockchain, was exploited, most people agreed to follow a hard fork which retroactively changed the core protocol such that the interpretation of the malformed contract no longer allowed exploitation. Ethereum Classic is the original, unforked chain, in which the flawed contract is respected, rather than altering the core protocol to circumvent a badly written contract.

mbrock2• 9 years ago

Kind of, except that ETC itself has also done a hard fork to do major protocol changes, so it's not exactly right to call it the "original, unforked chain."

The original Ethereum Homestead blockchain was designed to demand at least one hard fork. The mining difficulty was set to increase exponentially after some time, in order to force the community to make a decision regarding switching away from proof-of-work toward proof-of-stake. The ETC community hard forked the Homestead chain to remove this "difficulty bomb."

That's quite different from the "TheDAO" hard fork, but it's still a hard fork of a blockchain, so it's not true that ETC represents completely immutable law -- that community can also demonstrably agree to hard fork.

runeks4• 9 years ago

If the only reason to buy a token is because you expect to sell it later at a greater price, then this is known as a pyramid scheme, not investment. This will end the same way as all other schemes that rely on continual capital gains: collapse when people want to withdraw their profits, turning capital gains into capital losses, and thus revealing that there was never any future profit to be had (unless you were lucky to exit early).

Investment differs from speculation in that it offers a yield on capital, not just a capital gain. When a company pays dividends to shareholders, all holders gain. When a company's stock increases in price, the profits of those who gain are taken from those who've lost. Speculation is zero-sum, investment is not.

A yield on capital is fundamentally different from a capital gain, because a yield is a flow of profit paid out right now, as opposed to an alleged gain that will only be realized in the future (at which point the whole thing collapses, because the system depends on continual appreciation). Importantly, a yield on USD is paid in USD, a yield on bitcoins is paid in bitcoins, etc. Paying a yield in a scarce currency is a challenge, while bidding up the price, as measured by some other currency, is relatively simple.

cm21872• 9 years ago

You can invest in Gold, which doesn't yield any return. The notion of investment implies a return, whether it is a cash yield or a principal appreciation.

But I would say bitcoins are more similar to fiat currencies than commodities. Commodities have an intrinsic value due to their rarity. You cannot manufacture gold (technically you can but in very small quantities). Which means that if you find a gold coin which ancient romans were buying goods with, you can still buy a suit with it today. You can call that a convention but it is a convention dictated by the laws of physics, not by some white paper.

Fiat currencies instead only have value by convention or law, anyone can manufacture a new fiat currency, like everyone can create a new blockchain. A government can by law change the algorithm behind any of these blockchains. But a government cannot create gold. If someone finds a bitcoin key in 2000 years, long after the western civilisation is gone, it will be an interesting piece of history that can but placed in a museum, but you won't be able to buy a suit with it. With gold you will.

arethuza2• 9 years ago

"With gold you will."

I think I'd view it that either things will have changed so much that the idea of exchanging physical objects for a bit of shiny metal seems ludicrously crude or that we've had a widespread total collapse and nobody is interested in shiny soft metal either (gold seems to have been used from 5th millenium BC which is a long time but definitely not "forever" in terms of human pre-history).

mettamage• 9 years ago

Commodities have an intrinsic value due to their rarity

I tend to agree with this reasoning, but isn't it also the case that people try to give the illusion that commodities are rare? E.g. diamonds

runeks4• 9 years ago

You can invest in Gold, which doesn't yield any return. The notion of investment implies a return, whether it is a cash yield or a principal appreciation.

By my definition, that's not an investment. Nor would buying a rare painting be an investment, but speculation. By buying gold, or a rare painting, and keeping it locked away in your house, you're not making capital available for productive use. You're just speculating that its price, as measured in dollars, will increase. A transfer of value from the next buyer to yourself happens when you sell it, but no value has been produced.

Regardless of the terminology we choose, can't we agree there's a fundamental difference between buying something with money and holding on to that, versus making that money available for productive use (e.g. a producer buying more efficient machinery)? When you buy a bond you're investing, because the issuer can use your capital to increase its productivity, while paying out a part of the resulting profits as a yield. When you buy a lump of gold and gold on to it, all you're hoping for is that the dollar will be devalued sufficiently to make it appear that you can sell it for a profit (in dollars). No increase in productivity needs to take place for the latter to occur, whereas in the former case bond issuers can't afford to pay interest without creating profits.

hectorr• 9 years ago

I agree with you, this is all true in theory, but this definition also excludes non-dividend stocks that offer no governance controls. Like Snap, Google, Facebook, Amazon, etc. In addition, the move to buybacks in lieu of dividends in many companies changes the shareholder dynamics considerably. So does the fact that a ton of money is indexing these days.

The market has fundamentally changed. Graham was right, as proved by Buffett, but even Berkshire can't make Berkshire returns anymore. To make money in investing you have to be right when other people are wrong, otherwise the value is priced in. So speculation does have economic benefit, in that it serves to help find new value and fund boundary-pushing projects. It is VC with more liquidity and lower barriers to entry.

Sure, a lot of speculators will lose their shirt, but who cares? As long as they aren't over levered, the rest of society benefits from the fruits of their risk.

chias• 9 years ago

If the only reason to buy a token is because you expect to sell it later at a greater price, then this is known as a pyramid scheme, not investment.

I don't agree with this. Would you classify Google stock a pyramid scheme? You get zero dividend, zero voting rights, etc. etc. The only utility of owning a Google share is to sell it later when it's worth more. An important difference is that Google generates value to back its increasing stock price, whereas pyramid schemes do not.

runeks4• 9 years ago

You're right, I went to far classifying this as a pyramid scheme. My point was to separate investment from speculation. I believe we can categorically separate the two.

With investment we can have win/win/win situations. For example: an investor purchases a bond with a yield (thus making a profit), the issuer -- a producer of some good -- uses the capital to buy more efficient machinery, thus enabling him to lower costs and sell more product (thus making a profit), and the end result for the consumer of this good/product is a decrease in price (a net profit also).

While speculation does have economic value, the profits made by speculators is zero-sum: those who bet correctly take money away from those who bet wrongly. As such, it's categorically different from investment, as outlined above.

On further thought, though, perhaps this classification of speculation only applies to commodities, and doesn't make sense for stock. After all, instead of paying out dividends, companies can just use this money to buy back stock, thus transferring profits to investors in this manner instead.

isubkhankulov4• 9 years ago

Google and other large companies return money to shareholders by doing share buy backs at market prices.

livestyle3• 9 years ago

Tokens = Branded Gift Cards

Thoughts on Tokens

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