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RE: Blockchain Technology Potential (Series 1) – A Review of a Recent PAYPAL CryptoCurrency Patent Filing and What It Means for the Future of the Technology
What people don't understand is that network effects are zero for capital assets. A capital asset becomes worthless as soon as the smart money figures out that it cannot sustain itself on the Sharp-Lintner beta efficiency frontier. Bitcoin will likely be the first to collapse. Not hard science. Just slightly informed opinion.
I find this viewpoint quite interesting. Especially regarding network effects for capital assets. Whether in the transient or in absolute might require slightly different consideration. (Absolute end state as in ... as soon as they figure out so and so... like you alluded to). I will look up the reference to Sharp-Lintner. Thanks for sharing this.
The message of the Sharpe-Lintner Capital Asset Pricing Model is that the expected yield on a capital asset will be an increasing function of "beta", which is a measure of risk that indicates how correlated the asset's value is to changes in the value of the "market portfolio". The key point is that asset holders don't care about any of the benefits and characteristics of the asset as something useful. They only care about expected return, and how much of that they require depends upon risk. The implication here is Bitcoin is likely to be rendered obsolete by advances in technology that enable crypto suppliers to give holders higher expected return and/or lower risk. Once such an asset emerges, BitCoin's value will collapse to zero. All of this is just an expression of the instincts of an economist trained decades ago on this precise topic. I did my dissertation on exactly this issue. My dissertation was never published, but I am probably one of only 100 or fewer economists who understand the math for this problem. (It involves an "overlapping generations model", and the analysis involves the study of a first order nonlinear difference equation. Under general conditions, all but one path is ruled out. The study of such models gives the economist an understanding of what determines capital asset values. The Sharpe-Lintner model was popularized by Eugene Fama at the University of Chicago in the early 1970's. It is associated with the emergence of the "efficient markets hypothesis".
I see you have really valuable information. So we need to make sure this information gets to the people our there.
I have no stake in manipulating markets. I have no position long or short in cryptocurrency. My educational claim can be partially verified by noting that I use a University of Chicago email address on IDEAFARM.COM. (You can also pay UChicago to verify that I was awarded an A.M. degree in 1981.) I am just beginning to get my feet wet with both Steemit and cryptocurrency, having bought a hardware wallet a month or so ago. My dissertation was a mathematical study of a world that contained one producible capital asset (plant and equipment) and one nonproducible capital asset. At the time, this was innovative; I have no idea whether anyone else has done it. In my work, I interpreted the nonproducible asset as alternatively oil, dollars, and long term government debt. If written today, I wouild add cryptocurrency as the fourth interpretation. My life got busy and I never made time to publish the work or to do the next project, which was to generalize the model to allow for multiple nonproducible capital assets. So, you see, I've been thinking mathematically about what determines the price of a cryptocurrency asset since March of 1980, and for all of the years since then I've wanted to look at a market with multiple such assets but have never had the time to do the math to study it rigorously. That is exactly the analytical problem that today's crypocurrency emergence presents. I haven't done the math, but I've been thinking about this problem longer than anyone else on the planet, AFAIK.
I will do what I can to explain these ideas here and to present my credentials so that they can be verified. Perhaps, in the next few days or weeks, I can make time to do some rigorous mathematical analysis and present it here. What you can do to help is contact practicing economists, such as your old professor, and ask them to take a look at what I will post here on steemit and then post their opinions regarding merits.
I just came to steemit a few days ago and really don't understand how all of this works yet, so I suppose I'm not even a "minnow" yet in that I don't know even the basics of how to attract followers here.
Thanks for the explanation. Upvoted and followed. I will look into that model with greater detail and also look forward to your future writings.