What Is Financial Value?
From my view, there is no such thing as objective, intrinsic financial value and all claims of "utility" value (with regards to finances) are just proxies for what individual actors transacting on a market decide based on current context. Financial value is an emergent property of moment-in-time, voluntary transactions which lead to price discovery.
That's what this video is all about. As we better understand economics, we can prosper and understand what gives cryptocurrency financial value. Governments and central banks understand these truths. It's past time we understand them also.
Click the image above (or the link below) to view this on DTube. Or you can view the embedded YouTube video here:
I'd love to know what you think in the comments.
How do you determine financial value?
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Hey @lukestokes. I just started to dig a bit deeper and to try to understand how the Steem economy works, and value is one of the things that definetly need to be defined.
I am already studying what is the actual definition of value, wich will probably be the next topic of my steemit guide.
But i think the main problem i see is that people can't understand that there is a big difference between "price" and "value", and that changes everything.
If possible, would be nice to hear your opinion on the article i wrote about the Steem economy concept
Excellent post and a great example of adding value to a discussion. Your post is already past 7 days so I can’t vote on it to reward you, but I’ll give you a nice vote here and a follow. If more people added value to comments like this there’d be no need for upvote bots for attention or useless spam. Well done!
I'll help you upvote him too.. I agree @phgnomo did a good job of breaking it down.
Thank you for the vote, especially for the visibility to your audience.
Glad to hear also that you got interested on my writings.
The main thing that attracted me here to steemit is the fact that it is a bit easier to get people to read what you write, than just having a independent blog (wich i also have, but it is only on portuguese.
I am trying to finish the next part today.
Thank you again, and everyone else that gave me this support.
Yea great post indeed. Find out what true wealth is https://steemit.com/true/@askgloria/true-wealth
Just to let you know, i just finished to write another piece about steem economy. Would be nice to hear your opinion.
https://steemit.com/steem/@phgnomo/steemconomy-let-s-talk-about-price-and-value-of-steem-sbd
An awesome post (the one you linked) from a purely economic point of view. Too bad it already paid out. But I will follow you just like Luke did and vote a recent post by you as well. Adding value is what will always bring you good things.
Your comment caught my attention because it mentioned Steemit economy. It's something I have covered too in my own way. If you are interested in reading more, you can do it here. It covers Steemit economy and its currencies in detail.
Thank you for linking your article! More research material.
Computta
https://computta.com/?ref=268161
These guys have really figured this out. You can make money while you sleep, Just signup Download the free miner. There is never a fee. (not to sound like a shill) This is like a money drop! I will post again with details of my profits.
@steemcleaners @lukestokes this account is guilty of comment farming.
Easy....mining. More fun with friends!
Computta
https://computta.com/?ref=268161
These guys have really figured this out. You can make money while you sleep, Just signup Download the free miner. There is never a fee. (not to sound like a shill) This is like a money drop! I will post again with details of my profits.
Financial value is money and money is people, animals don't use or need money only humans do.
pocketsend:1000@phgnomo, great explanation of the Steem economy, thank you!
Successful Send of 1000
Sending Account: paul.atreides
Receiving Account: phgnomo
New sending account balance: 2579329
New receiving account balance: 999
Fee: 1
Steem trxid: c93321197f9e2744abb88dc67335467e5979ed1c
Thanks for using POCKET! I am running this confirmer code.
Agree to the Price and Value difference. Its like those cards that work in Food courts. A regular card is of no value until a food court decides to accept it. Yes it got value.
Next week 3 more food chains agreed and decided they will accept the card. Yes the value goes up instantly. Its directly proportional to the acceptance level i feel.
Financial value is arguably the end result of the other value systems that come into play. For example one person may value a token for speculative reasons. Another values it because of the utility the token provides. Others could value a token for sentimental reasons, for the sake of collecting things etc. although I suspect that speculation + utility are well more than 99% of the financial value, with speculation being 90% of those two right now.
The problem when you get away from utilitarian value is that the speculative value can more easily disappear all of a sudden without the utilitarian value to back it up. The utilitarian value ensures that even when the collective belief changes greatly, the people who need the token for its utilitarian purpose will provide a buffer against that change. There are many examples throughout history where value has been purely speculative with no utilitarian basis, or based upon false beliefs, the financial value can disappear entirely into nothing.
Hi @demotruk,
It seems you got a $6.4728 upvote from @demotruk at the last minute before the payout. (15.9h) and this comment is to make everyone aware.
Please follow @abusereports for additional reports of potential reward pool abuse. Thank you.
Interesting perspective. I agree, utility value is kind of the underlying base point for all our beliefs about value in that it tells the most convincing story we can trust others will most likely agree to also. I still don’t think it’s completely objective and unchanging as even our understanding of utility changes as our technology and beliefs change.
Absolutely right! Things are valued depending on the context of the situaion. People pay more for which is needed or wanted at a specific moment. The more people want or need something, the higher they're willing to pay and the sellers benefit by maximizing the price.
Yep. It’s really pretty basic but so many people get confused by this.
How it solved problems to the society determined its value, hi @lukestokes
you might want to check my post too about asset value, thanks. :)
It's true that value comes from what people who are willing to transact give to certain exchanges. Value is in the eye of the beholder.
Great video Luke...
Well said, @lukestokes
I've always liked to debunk the idea of 'intrinsic' value with this little scenario:
Imagine if you were marooned on a desert island via a plane crash - with no real hope of rescue anytime soon - what would be more valuable to you? The 15 gold bricks you happened to find in a treasure chest - or the 15 lbs of potatoes you managed to scrounge from the supplies in the plane wreck? Of course it's the latter.
As you said, value is entirely subjective - it's just a question of the situation one finds themself in. (ie. Supply and demand will always reign superior, no matter what.)
Great analogy. I had potatoes for dinner tonight with lovely melted cheese. I’d defiently pick the potatoes. :)
By the time I hit my teens, I learned to never doubt the delicious taste of a potato with melted cheese! :-)
Thanks for sharing this @lukestokes, really interesting take on financial value.
Over the past week, I've been lucky enough to work alongside a token economics expert with an extremely deep understanding of how to create value based on Utility. His name is James Waugh, and he himself, myself and another colleague actually review an ICO in my latest post on DTube - there might be some interesting concepts that he talks about in it that interest you.
Anyway, to respond to your video - I think that financial value is very much so something that emerges at the moment of transaction, but is based on certain intrinsic microeconomic properties, as well as some macroeconomic ones too.
For example, when reviewing an ICO (which is my job), I always look at the microeconomics of the token - how supply and demand can be balanced through a monetary policy to drive up price is something that really adds to the perceived value of an asset. Then, looking at utility in general is also important - like you said, creating something that people want, that can improve their life if they have it. This is something that I'm really trying to work on in the ICO space, and have been contemplating publishing an article about what I perceive to be tokenomic value.
Thanks again for sharing this Luke, I'd love to talk more about this with you.
Great comment. Couldn’t it also be argued that when you evaluate “utility” you’re really just looking for some reliable metric that will indicate investor sentiment toward financial value? Something can be really useful from a utility perspective, but still highly undervalued financially. At the same time, Ponzi schemes like Bitconnect can be totally useless and provide no real value be still be highly overvalued financially.
All that said, I agree, the ICO space certainly needs more attention on what value they are actually providing to the market virtical they claim to disrupt.
Thanks for the reply - I think that that is the point of utility in my opinion. Like you said with your air example, utility alone is worthless. I am going to be working with some ICOs on their token economics, and the key thing that people don't seem to realise is that the only goal of an ICO regarding its price target is to create a bottle neck system. This is composed of a utility, that is complimented by a sensible yet lucrative supply and demand structure.
To take Bitconnect, for example, it did have value. All ponzi schemes and pyramid schemes have value while the scheme is sustaining itself, as their value is the monetary velocity they create, which coupled with volume creates what I like to call monetary momentum (this will be one of the next big terms for tokens in my opinion, I think I'm the first to have used it). They have a value in the sense that demand keeps on going up, as does its utility (momentum) - this creates a bottleneck, but the issue with schemes like Bitconnect is that when the scheme crashes, so does all of its momentum. If momentum is at 0, when you times momentum by utility value (although assigning a figure to utility is difficult), you essentially get zero.
I think things being overvalued and undervalued is a simple matter of smart economics - it's something that I have had to learn myself, and have not been able to find a book that teaches me it thus far. I have been considering writing a 20-30 page article all about evaluating tokens, how it can be done etc. and using past tokens to showcase to some extent that my methods work. My main issue at the moment is finding the monetary support for such an article - it would take a couple of weeks to write at least, so getting financial support to not work on other projects is difficult, but a way around it that I have been thinking of is to post it in snippets on Steemit - I would really prefer to have it as an e-book and then break it up on Steemit though. Hopefully it could be used as a guideline for ICOs. Let me know what you think, I'm pretty analytically minded so I like to try and apply models to everything, which doesn't always work - I think it does in this case though.
Hey Luke, apologies for the slightly unrelated comment, but I was thinking - I just did a post about the distribution of SP on Steemit, Voting Circles and Whales. I'm thinking of doing a follow up post to tie in negative economic consequences/behavioural economics. It ties in to value and Steemit, what would you think of that? I also gave you a mention in my latest post, I'd appreciate your feedback!
Thomas Aquinas spoke of natural vs artificial wealth, where stuff like land and food is the natural and money is artificial. I haven't taken the time to read and digest more than that, but he was a brilliant enough thinker that I want to dig deeper at some point.
That makes sense but only in terms of “natural” wealth is more likely to create financial value (i.e. people wanting to pay for it) over time than most other things becuase we all need food to live and a place to stay.
How do I determine financial value? Well, is anyone envious of what I own? Or am I envious of their property? As a coin collector, it's obvious that I can hold a piece of metal in my hand and admire it. Or be proud that I have a collection that no one else does. But, to me that's not really financial value. I need to be secure in my future and my safety. If my metal coins provide that, that's good. If not, they're worthless and I need to look elsewhere.
Envy is a strange metric, but I think I get what you’re laying down.