# A LessWrong Crypto Autopsy

Wei Dai, one of the first peo­ple Satoshi Nakamoto con­tacted about Bit­coin, was a fre­quent Less Wrong con­trib­u­tor. So was Hal Fin­ney, the first per­son be­sides Satoshi to make a Bit­coin trans­ac­tion.

The first men­tion of Bit­coin on Less Wrong, a post called Mak­ing Money With Bit­coin, was in early 2011 - when it was worth 91 cents. Gw­ern pre­dicted that it could some­day be worth “up­wards of $10,000 a bit­coin”. He also quoted Mold­bug, who ad­vised that: If Bit­coin be­comes the new global mon­e­tary sys­tem, one bit­coin pur­chased to­day (for 90 cents, last time I checked) will make you a very wealthy in­di­vi­d­ual...Even if the prob­a­bil­ity of Bit­coin suc­ceed­ing is ep­silon, a mil­lion to one, it’s still worth­while for any­one to buy at least a few bit­coins now...I would not put it at a mil­lion to one, though, so I recom­mend that you go out and buy a few bit­coins if you have the tech­ni­cal chops. My fi­nan­cial ad­vice is to not buy more than ten, which should be F-U money if Bit­coin wins. A few peo­ple brought up some other points, like that if it ever be­came pop­u­lar peo­ple might cre­ate a bunch of other cryp­tocur­ren­cies, or that if there was too much con­tro­versy the Bit­coin econ­omy might have to fork. The thread got a hun­dred or so com­ments be­fore dy­ing down. But Bit­coin kept get­ting men­tioned on Less Wrong over the next few years. It’s hard to se­lect high­lights, but one of them is surely An­der’s Why You Should Con­sider Buy­ing Bit­coin Right Now If You Have High Risk Tol­er­ance from Jan­uary 2015. Again, peo­ple made ba­si­cally the cor­rect points and the cor­rect pre­dic­tions, and the thread got about a hun­dred com­ments be­fore dy­ing down. I men­tion all this be­cause of an idea, with a long his­tory in this move­ment, that “ra­tio­nal­ists should win”. They should be able to use their train­ing in crit­i­cal think­ing to rec­og­nize more op­por­tu­ni­ties, make bet­ter choices, and end up with more of what­ever they want. So far it’s been con­tro­ver­sial to what de­gree we’ve lived up to that hope, or to what de­gree it’s even re­al­is­tic. Well, sup­pose God had de­cided, out of some sym­pa­thy for our pro­ject, to make win­ning as easy as pos­si­ble for ra­tio­nal­ists. He might have cre­ated the biggest in­vest­ment op­por­tu­nity of the cen­tury, and made it visi­ble only to liber­tar­ian pro­gram­mers will­ing to dab­ble in crazy ideas. And then He might have made sure that all of the ear­liest adapters were Less Wrong reg­u­lars, just to make things ex­tra ob­vi­ous. This was the eas­iest test case of our “make good choices” abil­ity that we could pos­si­bly have got­ten, the one where a mul­ti­ply-your-money-by-a-thou­sand-times op­por­tu­nity ba­si­cally fell out of the sky and hit our com­mu­nity on its col­lec­tive head. So how did we do? I would say we did mediocre. Ac­cord­ing to the re­cent SSC sur­vey, 9% of SSC read­ers made$1000+ from crypto as of 12/​2017. Among peo­ple who were referred to SSC from Less Wrong—my stand-in for long-time LW reg­u­lars − 15% made over $1000 on crypto, nearly twice as many. A full 3% of LWers made over$100K. That’s pretty good.

On the other hand, 97% of us—in­clud­ing me—didn’t make over $100K. All we would have needed to do was in­vest$10 (or a few CPU cy­cles) back when peo­ple on LW started recom­mend­ing it. But we didn’t. How bad should we feel, and what should we learn?

Here are the les­sons I’m tak­ing from this.

1: Our epistemic ra­tio­nal­ity has prob­a­bly got­ten way ahead of our in­stru­men­tal ra­tio­nal­ity

When I first saw the posts say­ing that cryp­tocur­rency in­vest­ments were a good idea, I agreed with them. I even Googled “how to get Bit­coin” and got a bunch of tech­ni­cal stuff that seemed like a lot of work. So I didn’t do it.

Back in 2016, my father asked me what this whole “cryp­tocur­rency” thing was, and I told him he should in­vest in Ethereum. He did, and cen­tu­pled his money. I never got around to it, and didn’t.

On the broader scale, I saw what looked like wide­spread con­sen­sus on a lot of the rele­vant Less Wrong posts that in­vest­ing in cryp­tocur­rency was a good idea. The prob­lem wasn’t that we failed at the epistemic task of iden­ti­fy­ing it as an op­por­tu­nity. The prob­lem was that not too many peo­ple con­verted that into ac­tion.

2: You can only pre­dict the fu­ture in broad strokes, but some­times broad strokes are enough

Gw­ern’s ar­gu­ment for why Bit­coin might be worth $10,000 doesn’t match what ac­tu­ally hap­pened. He thought it would only reach that level if it be­came the world cur­rency; in­stead it’s there for...un­clear rea­sons. I don’t count this as a com­plete failed pre­dic­tion be­cause it seems like he was mak­ing sort of the right men­tal mo­tion—calcu­late the size of the best-case sce­nario, calcu­late the chance of that sce­nario, and re­al­ize there’s no way Bit­coin wasn’t un­der­val­ued un­der a broad range of as­sump­tions. 3: Ar­gu­ments-from-ex­treme-up­side some­times do work I think Mold­bug’s com­ment aged the best of all the ones on the origi­nal thread. He said he had no idea what was go­ing to hap­pen, but recom­mended buy­ing ten bit­coins. If Bit­coin flopped, you were out$10. If it suc­ceeded, you might end up with some crazy strato­spheric amount (right now, ten bit­coins = $116,000). Sure, this de­pends on an as­sump­tion that Bit­coin had more than a 110,000 chance of suc­ceed­ing at this level, but most peo­ple seemed to agree that was true. This re­minds me of eg the ar­gu­ment for cry­on­ics. Most LWers be­lieve there’s a less than 10% chance of cry­on­ics work­ing. But if it does work, you’re im­mor­tal. Based on the ex­traor­di­nary na­ture of the benefits, the gam­ble can be worth it even if the chances of suc­cess are very low. We seem to be un­usu­ally fond of these ar­gu­ments—a lot of peo­ple cite the as­tro­nom­i­cal scale of the far fu­ture as their rea­son for car­ing about su­per­in­tel­li­gent AI de­spite the difficulty of any­thing we do af­fect­ing it. Th­ese ar­gu­ments are weird-sound­ing, easy to dis­like, and guaran­teed to leave you worse off al­most all the time. But you only need one of them to be right be­fore the peo­ple who take them end up bet­ter off than the peo­ple who don’t. This decade, that one was Bit­coin. Over­all, if this was a test for us, I give the com­mu­nity a C and me per­son­ally an F. God ar­ranged for the perfect op­por­tu­nity to fall into our lap. We vaguely con­verged onto the right an­swer in an epistemic sense. And 3 − 15% of us, not in­clud­ing me, ac­tu­ally took ad­van­tage of it and got some­what rich. Good work to ev­ery­one who suc­ceeded. And for those of us who failed—well, the world is get­ting way too weird to ex­pect there won’t be similarly in­ter­est­ing challenges ahead in the fu­ture. • It is a lit­tle bit un­fair to say that buy­ing 10 bi­coins was ev­ery­thing you needed to do. I owned 10 bit­coins, and then sold them at a mea­ger price. Noth­ing changed as a re­sult of me merely un­der­stand­ing that buy­ing bit­coins was a good idea. What you re­ally needed was to sit down and think up a strict sel­l­ing sched­ule, and also com­mit to fol­low­ing it. E.g. spend$100 on bit­coin now, and later sell ex­actly 10% of your bit­coins ev­ery time that 10% be­comes worth at least $10,000 (I didn’t run the num­bers to check if these ex­act val­ues make sense, but you get the idea). Up­stream of not tak­ing effec­tive ac­tion was un­will­ing­ness to spend a few hours think­ing hard about what would ac­tu­ally be smart to do if the hy­po­thet­i­cal proved true. • A good gen­eral rule here is to think in terms of what per­centage of your port­fo­lio (or net worth) you want in a spe­cific as­set class, rather than mak­ing buy­ing/​sel­l­ing a bi­nary de­ci­sion. Then re­bal­ance ev­ery 3 months. For ex­am­ple, you might de­cide you want 2.5%-5% in crypto. If the price quadru­pled, you would well about 75% of your stake at the end of the quar­ter. If it halved, you would buy more. The ma­jor benefit is that this moves you from mak­ing many small de­ci­sions to one big de­ci­sion, which is usu­ally eas­ier to get right. • I agree that this is the ap­pro­pri­ate strat­egy to use when adding an in­vest­ment to your port­fo­lio, but note that if ap­plied to Bit­coin it did not yield the sort enor­mous gains that mo­ti­vated this post. So if you think the Bit­coin ex­am­ple should lead us to up­date away from out­side-view-mo­ti­vated be­liefs about our abil­ity to spot mar­ket in­effi­cien­cies/​in­vest­ment op­por­tu­ni­ties, you should prob­a­bly also en­dorse up­dat­ing away from out­side-view-mo­ti­vated port­fo­lio strate­gies like pick­ing an al­lo­ca­tion and re­bal­anc­ing. I just ran some num­bers on this. Sup­pose you had$100k in sav­ings, read the 2011 LessWrong post and were con­vinced to adopt a 95% cash 5% bit­coin al­lo­ca­tion at the end of Q1 2011, and there­after re­bal­anced on the last Mon­day of ev­ery quar­ter. (As­sume for sim­plic­ity that your non-Bit­coin hold­ings earn zero in­ter­est, that you don’t add or re­move any money from your to­tal sav­ings dur­ing the pe­riod, and that you suc­cess­fully avoided hav­ing your BTC stolen in MtGox etc.) If you ig­nore taxes, then at the end of 2017 you’d be left with $414k, which is de­cent but not life-chang­ing. Fur­ther, since you’re re­bal­anc­ing ev­ery quar­ter you’re pay­ing a lot of taxes if you’re in the US; as­sum­ing a fed­eral+state short term cap­i­tal gains rate of 30% you’d end up with$284k. (By only re­bal­anc­ing yearly you can de­crease your tax li­a­bil­ity but you miss out on some of the big ral­lies; as­sum­ing a 15% long-term cap­i­tal gains rate you end up with $258k.) By con­trast just buy­ing the same$5k of BTC in Q1 2011 and hodling un­til the end of 2017 would leave you with around $75M (per­haps$60M af­ter tax), which is more like the sort of “win­ning” Scott seems to be think­ing about here. But how would you know to do that rather than, say, sel­l­ing in mid-2011 for $100k? • A plau­si­ble strat­egy would be to buy say 100 bit­coins for$1 each, then sell 10 at $10, 10 at$100, and so on. With this strat­egy you would have made $111,000 and hold 60 bit­coins. • I think this seems cor­rect and is also what I have set­tled on. In the­ory you can use the Kelly Cri­te­rion to work out bounds on the per­centages to use. In prac­tice that seems hard. • I strongly agree. De­spite ap­pear­ances, I wouldn’t say some­one with 10 bit­coin to­day has “won” at all. Win­ning means get­ting more of what you ul­ti­mately care about, like goods and ser­vices. You only win if you con­vert your bit­coin into goods or dol­lars at the right time. I am re­minded of “buy low, sell high”: an empty phrase that can sound de­cep­tively like good in­vest­ment ad­vice. • In my case, it was about not-so-triv­ial in­con­ve­niences. Like Richard, I couldn’t in­stall the soft­ware and didn’t know a re­li­able place to buy. A few months ago, when a friend sent me a link to BitS­tamp and ex­plained what to do, I bought some BTC, which are cur­rently at triple the price I bought them. Nice, but not as nice as if the same thing would have hap­pened a few years sooner. (I am in a similar situ­a­tion with in­dex funds right now. I agree that it is a good idea to buy them. I just don’t know where ex­actly to go, what ex­actly to do, and what ex­actly will be the con­se­quences for taxes. I am not an Amer­i­can, so I would need spe­cific in­for­ma­tion for my coun­try.) But it is also my fault for not pay­ing enough at­ten­tion to this spe­cific topic. Not re­al­iz­ing that this ar­ti­cle is not the same as 99.99% of the rest; that this is the right mo­ment to stop read­ing web and ac­tu­ally do some­thing. Some of us were smarter than oth­ers. Good for them! But if we want to help each other, and avoid hav­ing the same thing hap­pen the next time, next time when you see an ex­cep­tion­ally im­por­tant ar­ti­cle, don’t just think “oth­ers have read the same ar­ti­cle, and they are smart peo­ple, so they know what to do”. That’s an­other form of illu­sion of trans­parency; af­ter read­ing the same text, some peo­ple will jump up, oth­ers will just con­tinue read­ing. Here are two things you can do to nudge your fel­low ra­tio­nal­ists in the right di­rec­tion: 1) Imag­ine a per­son who has very lit­tle knowl­edge in this spe­cific area, and for some rea­son is not go­ing to study more. Can the whole thing be sim­plified; ideally into a short list that is easy to fol­low? For ex­am­ple: “Step 1: reg­ister on­line at BitS­tamp. Step 2: send them the re­quired KYC doc­u­ments. Step 3: do the money trans­fer. Step 4: buy Bit­coins. Step 5: HODL!” More peo­ple will fol­low this pro­ce­dure, than if they just read “buy and/​or mine some Bit­coins, find out how”. 2) Offer help at your lo­cal meetup. Make a short lec­ture, ex­plain the de­tails, an­swer ques­tions. When peo­ple are in­ter­ested, guide them step by step. All we would have needed to do was in­vest$100 (or a few CPU cy­cles) back when peo­ple on LW started recom­mend­ing it.

All we needed was some­one who would make a lec­ture about Bit­coins at a meetup and then say: “If you are in­ter­ested, bring a lap­top and USD 100 to the next meetup and we will do this to­gether.” To­day, you would have a lo­cal ra­tio­nal­ist mil­lion­aires’ club. Think how awe­some that could be!

More gen­er­ally, if we want to win, we need to se­ri­ously im­prove our team­work. Some­times that means to co­op­er­ate with other peo­ple. Some­times that means to lead them. It is not true that each of us needs to play the game of life alone.

• This post is in­ter­est­ing to me, be­cause I feel strong re­sis­tance to act­ing as you sug­gest. (Back­ground: I made a lot of money from buy­ing Ether at $0.80, but was into crypto be­fore I was into ra­tio­nal­ism.) I think my in­tu­ition is some sort of fear of so­cial risk? I’m mostly will­ing to tell peo­ple what I think the right move is, but if they’re not mo­ti­vated to figure out the de­tails them­selves, then I worry that they will be up­set if the most likely out­come (los­ing 100% of their money) hap­pens, and that I’ll bear the so­cial cost. • Yeah, I tend to agree that so­cial fac­tors work against the idea of tel­ling some­one to in­vest in cryp­tocur­rency or other high-risk high-re­ward things like this. (And de­spite Eliezer’s point that mod­esty is not nec­es­sar­ily cor­rect in mak­ing de­ci­sions for one­self, I find it hard to sen­si­bly elimi­nate mod­esty in what one tells other peo­ple to do.) • Strongly agree that I prob­a­bly would have bought some crypto on LW ad­vice had there been a nearby meetup to go through the pro­cess of do­ing it. Other­wise my pri­ors about not giv­ing my credit card info (or what­ever) to strange web­sites were too strong to be­lieve I would even suc­cess­fully en­gage in the strat­egy. • To take a differ­ent set of data points in the com­mu­nity, MIRI and CFAR eas­ily filled up their re­spec­tive fund­ing gaps re­cently (largely as a re­sult of crypto), and if this con­tinues to be the new nor­mal then I’ll con­sider us to have passed fairly well (maybe a B+). If it’s a one off hit then I’ll agree to the C grade. Edit: Fixed the links. • I can’t click your link, but I dis­agree. MIRI got most of its money from Vi­talik, who I think was into crypto first and then found ra­tio­nal­ity/​LW. We don’t get any credit for that. Also, MIRI got a 500,000 dol­lar (why can’t I make the dol­lar sign on this site?) worth of Rip­ple dona­tion in 2014. If they had kept it as Rip­ple, it would be worth 50 mil­lion now. In­stead they sold it for 500,000 dol­lars (I’m not blam­ing them, this made sense at the time). So al­though MIRI and CFAR lucked out into get­ting some money from crypto, I don’t think it was pri­mar­ily be­cause of their (or our) great de­ci­sions. And if peo­ple had made great de­ci­sions they could have got­ten much more. • Maybe this is nit­pick­ing, but per their post MIRI got a plu­ral­ity of cryp­tocur­rency from Vi­talik but not a ma­jor­ity. If the web­site is ac­cu­rate, then out of 66% of the funds raised ($1.656m) Vi­talik con­tributed $763k, the other$893k of cryp­tocur­rency be­ing from other donors.

• Are the num­bers MIRI cites for crypto dona­tion amounts in USD based on how much they worth at the time of the dona­tion? Or how much that dona­tion is worth in USD based on price right now?

• Based on price at the time of dona­tion. My un­der­stand­ing is that they usu­ally sell right away.

• MIRI got most of its money from Vitalik

While not tech­ni­cally part of the win­ter fundraiser, don’t for­get that MIRI also got a mil­lion dol­lar ETH dona­tion in the spring. For the year, it’s more than half crypto, even af­ter ac­count­ing for the 1.25M from Open Phil.

• You can’t write a dol­lar sign be­cause it’s in­ter­preted as “start writ­ing math­e­mat­ics”. But if you type a back­slash first it gets es­caped and you get the dol­lar sign you hoped for: $. • I think it says some­thing good about our com­mu­nity that who­ever im­ple­mented this fea­ture as­sumed peo­ple would be more likely to want to write math­e­mat­ics than to dis­cuss amounts of money. • That is a nice thought, but it seems more likely that they just didn’t think of it… (also, I don’t think that par­tic­u­lar bit was cus­tom-writ­ten for LW, though the dev team can cor­rect me on that if I’m mis­taken) • Nope, not cus­tom-writ­ten. We are us­ing this plu­gin: https://​​github.com/​​efloti/​​draft-js-math­jax-plugin How­ever, I did con­sider whether to change the be­hav­ior of press­ing ‘$’ and de­cided that peo­ple would prob­a­bly use LaTeX more of­ten than try­ing to use the dol­lar sign, and so was rea­son­ably happy with that de­fault be­hav­ior.

• FWIW, I ran into the same is­sue with Ar­bital, and very quickly de­cided to change it to . Other­wise, any time you’re writ­ing a post about money, it’s su­per in­con­vinient.

• In­ter­est­ing!

I ac­tu­ally had in mind the origi­nal au­thor of the plu­gin, when I said who­ever it was just didn’t con­sider it; but it’s in­ter­est­ing that you did think about it in this way!

It might be cool to sur­vey cur­rent users of the site, to see what in fact are the rel­a­tive prevalences of these two use cases. (Also there are lots of other similar ques­tions I’d love to have the an­swers to.)

• de­cided that peo­ple would prob­a­bly use LaTeX more of­ten than try­ing to use the dol­lar sign

Err… this seems like the kind of thing that *re­ally* wouldn’t stand up to user test­ing.

• Tak­ing my place in his­tory—one of my first tasks as an in­tern at MIRI was to write some ruby scripts that dealt with some as­pects of that dona­tion.

Not only did that ex­pe­rience land me my first pro­gram­ming job, but just re­al­iz­ing now that it was also the im­pe­tus that led me to grab more bit­coin (I had sold mine at the first peak in 2013) AND look into Stel­lar. Prob­a­bly the most lu­cra­tive in­tern­ship ever.

(Shoutout to Malo/​Alex if you guys are still lurk­ing LW)

• (Re-writ­ing this com­ment from the origi­nal to make my point a lit­tle more clear).

I think it is prob­a­bly quite difficult to map the de­ci­sions of some­one on a con­tinuum from re­ally bad to re­ally good if you can’t simu­late the out­comes of many differ­ent pos­si­ble ac­tions. There’s rea­son to sus­pect that the “op­ti­mal” out­come in any situ­a­tion looks vastly bet­ter than even very good but slightly sub-op­ti­mal de­ci­sions, and vise-versa for the least op­ti­mal out­come.

In this case we ob­served a few peo­ple who took mas­sive risks (by de­vot­ing their time and en­ergy into un­der­stand­ing or de­vel­op­ing a par­tic­u­lar tech­nol­ogy which very well may have turned out to be a boon­dog­gle) re­ceive mas­sive re­wards from the suc­cess of it, al­though it could have very well turned out differ­ently, based on what ev­ery­one knew at the time. I think the ar­gu­ments for cryp­tocur­rency be­com­ing sucess­ful that ex­isted in the past were very com­pel­ling but they weren’t ex­actly air­tight log­i­cal proofs (and still aren’t even now). Not win­ning hugely be­cause a le­gi­t­i­mately large risk wasn’t taken isn’t ex­actly “los­ing” (and while buy­ing bit­coins when they were cheap wasn’t a large risk, in­vest­ing time and en­ergy into be­com­ing knowl­edgable enough about crypto to know it was worth tak­ing the chance may have been. A lot of the biggest win­ners were peo­ple who were close to the de­vel­op­ment of cryp­tocur­ren­cies).

But even so, a few of these win­ners are close to the LW com­mu­nity and have in­vested in its de­vel­op­ment or some of its pro­jects. Doesn’t that count for some­thing? Can they be con­sid­ered part of the com­mu­nity too? I see no rea­son to keep the defi­ni­tion so strict.

• Did quick stats on SSC sur­vey data, wanted to re­port null re­sults: a per­son’s favoura­bil­ity rat­ing of the ra­tio­nal­ity com­mu­nity pre­dicted the amount of money some­one made in crypto very weakly (r=0.07), though more than IQ (r=0.03). Both with tiny p val­ues.

• I’m one of the 3% who made over $100K (I made ~$500K).

I have to agree with other com­menters that it was gen­uinely difficult to buy the cryp­tocur­rency in the first place. It took me about 5 solid hours to learn how it worked, and then sev­eral days to fun­nel the cur­rency through the var­i­ous nec­es­sary con­ver­sions, any of which might’ve un­ex­pect­edly eaten my hard-earned cash for some in­com­pre­hen­si­ble rea­son.

In hind­sight it’s easy to see this as “5 hours’ work for $100,000/​hour, plus some wait­ing”, but at the time there was no such guaran­tee of suc­cess. The only rea­son I per­sisted was be­cause I was in­ter­ested in the cryp­tog­ra­phy as­pect and wanted to be a part of an up-and-com­ing tech­nol­ogy. • The only rea­son I per­sisted was be­cause I was in­ter­ested in the cryp­tog­ra­phy as­pect and wanted to be a part of an up-and-com­ing tech­nol­ogy. And that is a re­ward I guess a very high frac­tion of the peo­ple ac­tu­ally ‘in­vest­ing’ in Bit­coin had. Those hack­ers, nerds, tech en­thu­sists didn’t need high frac­tions of like­li­hood times pay­off. And maybe the true les­son to draw from this is not to look at an ab­stract pay­off but at the so­cial dy­namic: Are there enough peo­ple at­tracted to some­thing. • I sus­pect it was the triv­ial in­con­veninece of set­ting it up that stopped most of those who were con­sid­er­ing it. • I re­mem­ber recit­ing “be­ware triv­ial in­con­ve­niences” to my­self in my head when I went through the pro­cess of figur­ing out how to buy BTC in De­cem­ber 2010. It was good ad­vice. • Yeah. I was won­der­ing if I get any points for spend­ing two or three evenings back in 2014 try­ing to get some bit­coin and failing due to the com­plete crap­piness of the user ex­pe­rience. • I mean, you get points for try­ing, but those points don’t go to your fi­nal grade. Your fi­nal grade is only ever de­ter­mined by re­al­ity, and if you didn’t make mil­lions be­cause of a triv­ial in­con­ve­nience, then you didn’t make mil­lions. • I’m a lit­tle cu­ri­ous, can you go into more de­tail? I had always as­sumed that the “too in­con­ve­nient” bar­rier was when you had to mine it your­self, or when you had to slowly wire money to some fishy site like Dwolla and from there to some fishy ex­change like Mt. Gox, and that by 2014 it would largely seem eas­ier and less risky. • Speci­fi­cally, I first looked into buy­ing some. I found that all the ex­changes re­quired far more of my per­sonal in­for­ma­tion than I was will­ing to sub­mit to what looked like and, in ret­ro­spect, very well may have been a scam. Next I tried to mine some, but I didn’t own any com­put­ers that could re­ally do it effec­tively. I only had lap­tops and if I re­call cor­rectly I didn’t have enough spare disk space to hold the blockchain. I could have per­sisted along the route of pur­chas­ing the bit­coin and ex­posed my­self to re­ally quite sig­nifi­cant fi­nan­cial risk. I could have per­sisted along the min­ing route and pur­chased a new ex­pen­sive com­puter. While I felt like bit­coin could be­come A Thing, nei­ther of those op­tions seemed worth the trade­off. • I found the in­con­ve­nience more than triv­ial. I made sev­eral at­tempts over the life of Bit­coin to ei­ther mine some (back when that was prac­ti­cal for any­one) or buy some, but my efforts always ran into the sand. The soft­ware didn’t work, or the web sites didn’t look like cred­ible places to send sub­stan­tial sums of money to, or what­ever. Scan­dals like Mt Gox didn’t help. Of course, plenty of peo­ple did get past those hur­dles, so I can’t blame any­one but myelf. I did fi­nally man­age to buy a to­ken quan­tity of Bit­coin a few months ago, but I ex­pect the boom is now over. I haven’t both­ered track­ing the price since then. I’ve even had ads for digi­tal coins in my Face­book feed, tar­get­ted at the gen­eral pub­lic (eww!). In fair­ness to Bit­coin, they mostly looked like scams with lit­tle like­li­hood of do­ing any­thing with their cus­tomers’ money but keep­ing it. • or web sites didn’t look like cred­ible places to send sub­stan­tial sums of money to It seems to me that this par­tic­u­lar bar­rier is some sort of dou­ble count­ing. If you’ve already de­cided that this bit­coin thing is weird and risky, but also worth a shot, then you shouldn’t change your mind when pre­sented with ev­i­dence that it’s in­deed weird and risky. • It’s mul­ti­ple risks, each singly counted. Bit­coin in gen­eral is risky for definite rea­sons: volatility, the pos­si­bil­ity that gov­ern­ments will come down hard on it, se­cu­rity of the cryp­tog­ra­phy it de­pends on, etc. But any par­tic­u­lar method of op­er­at­ing in Bit­coin has its ad­di­tional risks of the pro­bity and se­cu­rity of those in­volved. My un­con­fi­dence in some of the cryp­tocur­rency deal­ers I looked at was not sim­ply be­cause they were cryp­tocur­rency deal­ers. • Yeah, it’s definitely true that it’s an ad­di­tional risk. My in­tu­ition that it’s likely to be a mis­firing heuris­tic lingers, though. Say any given ex­change has a 50% chance of los­ing or steal­ing your money, and that it’s in­de­pen­dent of the chance Bit­coin suc­ceeds. (That feels pretty pes­simistic to me, and the ac­tual track record has been no­tably bet­ter than that.) If you needed 1/​10000 cre­dence for suc­cess be­fore adding that fac­tor, now you need 15000. I’m skep­ti­cal that any of us are well-cal­ibrated enough to put Bit­coin’s suc­cess at higher than 1/​10000 but lower than 15000. It also seems that it’s un­likely to be un­cor­re­lated. I would ex­pect a higher chance of ex­changes work­ing in wor­lds where Bit­coin is suc­cess­ful. (Be­cause if ex­changes are con­sis­tently un­re­li­able, that will make Bit­coin less at­trac­tive, and be­cause they’re both en­tan­gled with difficult-to-ob­serve fac­tors like “the com­mu­nity ac­tu­ally tries to make it work rather than just scam­ming ev­ery­one”.) This is of course all hind­sight, so I could eas­ily be wrong. But it seems definitely true to me that most peo­ple have a lot of trou­ble over­com­ing con­ser­va­tive heuris­tics enough for suc­cess­ful “black swan farm­ing”, and pay­ing too much at­ten­tion to su­perfi­cial feel­ings of sketch­i­ness seems likely to be -EV in that con­text. • Say any given ex­change has a 50% chance of los­ing or steal­ing your money Ap­ply­ing a pop­u­la­tion av­er­age to an in­di­vi­d­ual is a course of last re­sort, es­pe­cially in a mar­ket­place that con­tains ev­ery­thing from solidly re­li­able busi­ness­peo­ple to those who will just take your money and run. One must seek fur­ther in­for­ma­tion about each in­di­vi­d­ual to make a judge­ment about who can best be trusted. For ex­am­ple, the re­views I found of one of the ex­changes I con­sid­ered were al­most all nega­tive, the main com­plaint be­ing that it was next to im­pos­si­ble to with­draw funds from it and cus­tomer sup­port was un­con­tactable. The few pos­i­tive re­views I found read like spam. No-brainer there—avoid. It also be­came clear to me that to deal se­ri­ously in cryp­to­coins (and deal­ing at all is too ex­pen­sive to do frivolously), you must have your own wallet on your own ma­chine, and not merely have an ac­count with an ex­change that holds your coins for you in their own wallet. The track record says that no ex­change can be trusted to that ex­tent. The lat­ter is the usual way of han­dling con­ven­tional cur­rency, but that is be­cause banks, funds, etc. are on the whole and by and large, rea­son­ably re­li­able, notwith­stand­ing no­table fi­nan­cial crashes from time to time. (Even then, you need to miti­gate the risk by di­ver­sify­ing not just your kinds of in­vest­ment, but the in­sti­tu­tions they are in­vested with.) You then have to take se­ri­ously the se­cu­rity of that wallet, to the point of never ex­pos­ing it to the in­ter­net ex­cept as ab­solutely nec­es­sary and for the short­est pos­si­ble time. In short, you have to think about spe­cific failure modes and plan against them. • Your post is a good sum­mary of how to have ex­cel­lent cryp­tocur­rency se­cu­rity, but why is it a re­quire­ment to have ex­cel­lent se­cu­rity? In sen­tences like this one: you must have your own wallet on your own machine Where does the “must” come from? What would hap­pen if you didn’t? This seems like ap­ply­ing K-se­lec­tion strat­egy, in a situ­a­tion where a r-se­lec­tion strat­egy might out­perform. I posit that it would have been bet­ter to use$10 to buy 5 Bit­coin with­out sub­stan­tial con­sid­er­a­tion of se­cu­rity risk, rather than put $0 in due to wor­ries about se­cu­rity. Yes, you might lose that$10 in all sorts of ways, but that’s the risk you’re sign­ing up to take, and the po­ten­tial re­ward makes it worth it.

• I bought 200 BTC and lost them in a hack. Later bought 50 ether and kept them in a wallet, so I still have those. In light of that, I’d say se­cu­rity was pretty im­por­tant!

• Se­cu­rity is great! I love se­cu­rity. I recom­mend hard­ware wallets if you’re stor­ing a non-triv­ial amount of crypto.

But the ques­tion is about what some­one should do when it’s 2011 and they want to buy $10 worth of Bit­coin as a (+EV) lot­tery ticket. My claim is that, if your goal is “have some Bit­coin”, then the op­tions go like this: “Buy Bit­coin + im­ple­ment se­cu­rity best prac­tices” > “Buy Bit­coin with­out wor­ry­ing about se­cu­rity” > “Don’t buy Bit­coin” It’s great if you can get the first one, but it’s ir­ra­tional to let the ex­is­tence of the first strat­egy push you into the third strat­egy. The sec­ond strat­egy ends up with “maybe some Bit­coin”, which is more Bit­coin then “definitely no Bit­coin”. • Th eas­iest way to buy Bit­coin was MtGox for a long time and any­body who just kept the Bit­coins at MtGox lost them af­ter­wards. • Yep! When you make 1000-to-1 bets, usu­ally you lose. • For my pur­poses, I rate the mid­dle op­tion lower than the last. I’m not in­ter­ested in merely “hav­ing some Bit­coin” (or other cryp­tocur­ren­cies, some of which look more promis­ing go­ing for­ward). My only rea­son for do­ing this is for a sig­nifi­cant chance of mak­ing some use­ful amount of money. By “use­ful” I am roughly think­ing in terms of at least 6-figure sums of money. Proper se­cu­rity is es­sen­tial at that scale, and cau­tion over who I deal with. My cur­rently trifling amount of BTC was only to test the ba­sics of how to do it, and in fact I haven’t yet tested the other half of the mat­ter, i.e. turn­ing BTC back into con­ven­tional cur­rency. • a sig­nifi­cant chance of mak­ing some use­ful amount of money It sounds like you’re talk­ing about a differ­ent bet than the one the ar­ti­cle is about. Gw­ern’s 0.05% is not “a sig­nifi­cant chance”. I agree that for your to­tally differ­ent case, you should put more effort into se­cu­rity. [Edit: The 8020 for crypto se­cu­rity is to buy from Coin­base if you’re in the US, or the most cred­ible lo­cal ex­change if not. If you’re buy­ing alt­coins, con­vert from BTC/​ETH on poloniex or shapeshift. Then put it in a hard­ware wallet such as Tre­zor or Ledger, with pa­per copies of your pri­vate key in a cou­ple se­cure lo­ca­tions.] • Com­pletely agreed. I even pub­li­cly an­nounced on my Face­book when Bit­coin was USD that I was buy­ing 100USD worth, but then once I looked into how to even con­vert USD to Bit­coin, I said “eh, not worth, even it for some in­ter­est­ing eco­nomic ex­per­i­ment”. • This is pretty low on the list of op­por­tu­ni­ties I’d kick my­self for miss­ing. A longer re­ply is here: https://​​www.face­book.com/​​yud­kowsky/​​posts/​​10156147605134228 • I think a large part of what pre­vented many peo­ple from in­vest­ing in Bit­coin may have been the epistemic norms com­monly referred to nowa­days as “the ab­sur­dity heuris­tic”, “the out­side view”, “mod­est episte­mol­ogy”, etc. In other words, many of us may have held the (sub­con­scious) be­lief that it’s im­pos­si­ble to perform sub­stan­tially bet­ter than the mar­ket, even in situ­a­tions where the Effi­cient Mar­kets Hy­poth­e­sis may not fully ap­ply. To put it an­other way: Well, sup­pose God had de­cided, out of some sym­pa­thy for our pro­ject, to make win­ning as easy as pos­si­ble for ra­tio­nal­ists. He might have cre­ated the biggest in­vest­ment op­por­tu­nity of the cen­tury, and made it visi­ble only to liber­tar­ian pro­gram­mers will­ing to dab­ble in crazy ideas. And then He might have made sure that all of the ear­liest adapters were Less Wrong reg­u­lars, just to make things ex­tra ob­vi­ous. I think many of us con­sid­ered this, and un­con­sciously dis­missed it due to the ob­vi­ous ab­sur­dity: surely things can’t be that easy, right? Sure, we may be ra­tio­nal­ists, and sure, ra­tio­nal­ists “ought to win”, but surely win­ning can’t be so easy that the op­por­tu­nity to win liter­ally hits us on the head, right? I think what this points to is a fun­da­men­tal in­abil­ity on our part to Take Ideas Se­ri­ously. Of course, most peo­ple don’t have this abil­ity at all, and we’re surely do­ing much bet­ter on that count—but what mat­ters in this case isn’t your rel­a­tive su­pe­ri­or­ity to other peo­ple, but your ab­solute level of skill. (I’m us­ing the pro­noun “your” here to re­fer to the ma­jor­ity of ra­tio­nal­ists who didn’t in­vest in Bit­coin, not the few who did.) The cor­re­spond­ing solu­tion seems ob­vi­ous: work to im­prove our abil­ity to Take Ideas Se­ri­ously, with­out dis­miss­ing ab­surd-sound­ing ideas too quickly. Easier said than done, of course. • A hind­sight solu­tion for ra­tio­nal­ists to have re­duced the setup costs of buy­ing bit­coin would have been ei­ther to have had a Ra­tion­al­ist min­ing pool or ar­range to have a few peo­ple buy in bulk and serve as points of dis­tri­bu­tion within the com­mu­nity. This sug­gests that if a fu­ture op­por­tu­nity ap­pears to be worth the risk of in­vest­ment, but has some bar­rier to en­try that is in­di­vi­d­u­ally costly but col­lec­tively triv­ial, we ought to work first to elimi­nate that bar­rier to en­try, and then al­low the com­mu­nity to eval­u­ate more dis­pas­sion­ately on risk and re­turn alone. • I like this much much bet­ter than the other pro­posed pro­posed solu­tion, of effec­tively pres­sur­ing peo­ple to buy. Re­mov­ing in­con­ve­niences (triv­ial and oth­er­wise) would prob­a­bly have been the most helpful thing some­one could do. (I can’t hon­estly re­mem­ber if I was in the LW com­mu­nity yet when I started in Bit­coin, as they were both so long ago, but I was definitely not part of an IRL ra­tio­nal­ist com­mu­nity, and it didn’t oc­cur to me that ra­tio­nal­ists would be in­ter­ested in Bit­coin at the time.) • That’s a smart idea! • I bought 10 bit­coins back around 2012. I for­get the ex­act date, but they were around ten dol­lars each. To­day, that in­vest­ment is worth zero dol­lars, be­cause those bit­coins were in Mt Gox. My point: there may be a non­triv­ial chunk of LWers who cor­rectly pre­dicted where bit­coin would go, but still ended up with­out any sig­nifi­cant profit. (That ac­tu­ally would not in­clude me; I just got into it to test a trad­ing al­gorithm, then left a few bit­coins sit­ting around af­ter the test was done.) • I have some Bit­coin, and have made some money on Bit­coin[1], and am cur­rently a soft­ware en­g­ineer at a Bit­coin startup, where I’ve been work­ing since the be­gin­ning of 2015. I have com­pli­cated feel­ings about this. Ob­vi­ously I in­vested in Bit­coin be­cause I thought it was +EV, and I did make a nice profit by do­ing so. That doesn’t nec­es­sar­ily mean I was cor­rect to imag­ine that it was +EV, and I strug­gle to un­der­stand whether my choices were rea­son­able or just lucky. I think Eliezer’s re­cent se­quence about ad­e­quacy prob­a­bly has some­thing use­ful to say about this. But I also think that a lot of Bit­coin and cryp­tocur­rency be­hav­ior is fun­da­men­tally a func­tion of the psy­chol­ogy of the mar­ket, rather than ac­tual value, and the psy­chol­ogy of the mar­ket is a dan­ger­ous thing to bet on. Of course, it’s not wrong to take dan­ger­ous bets with good up­side. Ul­ti­mately I think cryp­tocur­rency in­vest­ing may or may not have been the cor­rect de­ci­sion for peo­ple de­pend­ing on their cir­cum­stances. There’s no con­ven­tional wis­dom or ob­vi­ous right an­swer to fall back on. I might have more to say on this later. [1] Bit­coin is very hard to store safely. Don’t ask any­body how much Bit­coin they have (at least in pub­lic non-anony­mously). They would be very fool­ish to dis­close it, and the more it is the more fool­ish they would be. • Col­lec­tively the com­mu­nity has made hun­dreds of mil­lions from cypto. But it did so by get­ting a few wealthy peo­ple to buy many bit­coin, rather than many peo­ple to buy a few bit­coin. This is a more effi­cient model be­cause it avoids big fixed costs for each in­di­vi­d­ual. It also avoid ev­ery­one in the com­mu­nity hav­ing to ded­i­cate some of their at­ten­tion to think­ing about what out­stand­ing in­vest­ment op­por­tu­ni­ties might be available to­day. Due to de­clin­ing marginal re­turns, hun­dreds of mil­lions is a sub­stan­tial frac­tion as good as billions. So I think we did alright. • If you’re con­sid­er­ing the welfare of the in­di­vi­d­u­als con­cerned: “a few wealthy peo­ple make mul­ti­ple mil­lions” is not as good an out­come as “dozens of not-so-wealthy peo­ple make hun­dreds of thou­sands” be­cause of diminish­ing marginal re­turns. If you’re con­sid­er­ing cryp­tocur­rency gains only as fuel for effec­tive al­tru­ism or some­thing, then “a few wealthy peo­ple make mul­ti­ple mil­lions” might be as good an out­come, but then it’s no longer so plau­si­ble that “hun­dreds of mil­lions is a sub­stan­tial frac­tion as good as billions”. If you’re con­sid­er­ing cryp­tocur­rency gains only as fuel for some nar­row kind of effec­tive al­tru­ism (say, dona­tions to help AI safety work) then both halves might be right, but then it seems rea­son­able to ask whether those hun­dreds of mil­lions have in fact gone to AI safety dona­tions. My im­pres­sion is that most of the money has just gone into the per­sonal for­tunes of the peo­ple who bought cryp­tocur­rency. That’s fine, but if so then I think we’re back with my first para­graph. • From a self­ish point of view, I don’t think most ra­tio­nal­ists would benefit sig­nifi­cantly from a bit of ex­tra money, so it doesn’t make much sense to be ded­i­cat­ing their truly pre­cious re­source (time and at­ten­tion) to iden­ti­fy­ing high-risk high-re­turn in­vest­ments like bit­coin and in this case figur­ing out how to buy/​store them safely. And I’m some­one who bought bit­coin for the sake of en­ter­tain­ment. From an al­tru­is­tic point of view, yes I ex­pect hun­dreds of mil­lions of dol­lars to be donated, and the cur­rent flow is con­sis­tent with that—I know of 5 mil­lion in the last few months, and there’s prob­a­bly more than hasn’t been de­clared. “then it’s no longer so plau­si­ble that “hun­dreds of mil­lions is a sub­stan­tial frac­tion as good as billions”.” At the full com­mu­nity level the marginal re­turns on fur­ther dona­tions also de­clines, though more slowly: https://​​80000hours.org/​​2017/​​11/​​tal­ent-gaps-sur­vey-2017/​​#how-diminish­ing-are-re­turns-in-the-community • My biggest take­away is that there’s a chance I can beat mar­kets which as far as I could tell ought to have been pretty effi­cient, so I’m per­son­ally go­ing to at­tempt to do that more of­ten in the fu­ture un­til I get ev­i­dence that it’s not work­ing. • Dude, no. You are as­sum­ing that be­cause you beat the mar­ket one time, through crypto, that you can of­ten do so. So then we need to ask our­selves, are the peo­ple who beat the mar­ket (with crypto) peo­ple that con­sis­tently beated the mar­ket be­fore crypto? In al­most all cases the an­swer is no. This is a spe­cial case where lots of peo­ple who are oth­er­wise not good at in­vest­ing made lots of money. Beat­ing the mar­ket in this unique case shouldn’t sug­gest any abil­ity to re­cur­sivly beat the mar­ket. • 15% seems like a lot. Maybe I have that im­pres­sion be­cause I tend to reach for a null hy­poth­e­sis as my de­fault model, which in this case is that LWers would do no bet­ter with cryp­tocur­rency than other peo­ple who had similar lev­els of in­ter­est in tech. And 15% of peo­ple mak­ing$1000+ is way more than I would pre­dict on that model.

• Scott’s whole point is ‘if ra­tio­nal­ity is good for any­thing, we should be do­ing much bet­ter than the av­er­age tech in­dus­try.’

• And mine is that it sounds like we did do much bet­ter than the av­er­age tech in­dus­try.

Though maybe you/​Scott/​oth­ers have differ­ent in­tu­itions than I do about how com­mon it has been for tech folks to make a bunch of money on cryp­tocur­rency. My im­pres­sion from Scott’s post was that we wouldn’t differ much in our es­ti­mates of the num­bers, just about whether “15% is way less than 100%” was more salient than “15% is way more than 1% (or what­ever the rele­vant base rate is)”.

• I agree, 15% struck me as a huge num­ber. In par­tic­u­lar, ev­ery­one in the tech in­dus­try has had the money to in­vest over the last sev­eral years, while LessWrongers are a lot younger and poorer. More than half of SSC sur­vey re­spon­ders are stu­dents or en­try-level em­ploy­ees, and less than half of peo­ple well into their ca­reers are in tech. Also, this is still just an on­line fo­rum, so I wouldn’t ex­pect in­vest­ment op­por­tu­ni­ties to spread as con­ta­giously as among peo­ple hav­ing lunch to­gether at a tech com­pany office ev­ery day.

Bot­tom line: based purely on back­ground de­mo­graph­ics, I would have ex­pected at least 5 times as many (as a %) of Sili­con Valley peo­ple to have made money off crypto as LessWrongers. Based on the 15% re­sult, I’d be sur­prised if we didn’t do 5 times bet­ter.

I won­der if this comes down to per­sonal situ­a­tion bias. Scott made no money, and he gives us a C. I made enough to donate >$5k in BTC to MIRI, and I’d give us an A- at worst. • Do we have any data on how well other peo­ple who had similar lev­els of in­ter­est in tech did? • It seems like a good idea to col­lect self-re­ports about why LessWrongers didn’t in­vest in Bit­coin. For my own part, off the top of my head I would cite: • less visi­ble en­dorse­ment of the benefits than e.g. cry­on­ics; • vaguely sens­ing that cryp­tocur­rency is con­tro­ver­sial and might make my taxes con­fus­ing to file, etc.; • and re­flex­ively writ­ing off ar­ti­cles that give me in­vest­ment ad­vice be­cause most in­vest­ment ad­vice is bad and I gen­er­ally as­sume I lack some min­i­mal amount of wealth needed to ex­ploit the op­por­tu­nity. So some­thing like We Agree: Get Froze,might have helped. I also could have ac­tu­ally eval­u­ated the difficulty of filing taxes given that I’d pur­chased bit­coins, in­stead of flinch­ing away and de­cid­ing it was too difficult on the spot. I could pay more at­ten­tion to figures that are rel­a­tively small even for some­one with lit­tle wealth. If sur­veys are still be­ing done, that seems like im­por­tant data to col­lect on the next sur­vey. I would want to know if most peo­ple knew but didn’t in­vest, or sim­ply didn’t know at all, and so on. • I didn’t in­vest in Bit­coin be­cause I don’t in­vest in things that I don’t un­der­stand well enough to be con­fi­dent that the Effi­cient Mar­ket Hy­poth­e­sis doesn’t ap­ply. I con­tinue to be­lieve this is a ra­tio­nal choice—okay, sure, this one time I might have made a lot of money, but most of the time I would waste a bunch of money/​time/​other re­sources. And no one writes blog posts about how they could have lost a lot of money but didn’t, so the availa­bil­ity heuris­tic is go­ing to over­weight suc­cesses. • As some­one who made a profit in­vest­ing in Bit­coin I en­dorse and en­courage your de­ci­sion. I definitely want to avoid this some­how turn­ing into “ra­tio­nal­ists should win by try­ing to jump on ev­ery crazy make-money-fast scheme be­cause one of them could be the next Bit­coin.” If it’s the case that ra­tio­nal­ists should have been able to pre­dict Bit­coin’s suc­cess, we should fo­cus on spe­cific fac­tors that in­di­cated there was some­thing there to be got­ten. I can talk now about all the smart peo­ple I know who be­lieve in Bit­coin as a rea­son to want to keep it, but I didn’t know any of those peo­ple yet when I first bought it—I met them along the way. It’s hard for me to re­mem­ber what it was that at­tracted me to it at the time. I think it had a lot to do with the way the tech­nol­ogy played into my own spe­cific vi­sion for the fu­ture of tech, which is very per­sonal and not nec­es­sar­ily portable to an ar­bi­trary per­son in the ra­tio­nalo­sphere (in terms of rea­sons to have be­lieved in Bit­coin at the time.) • okay, sure, this one time I might have made a lot of money, but most of the time I would waste a bunch of money/​time/​other re­sources. This seems like a good heuris­tic, but is it ac­tu­ally true that Bit­coin was an un­differ­en­ti­ated mem­ber of an ex­tremely large class? I agree that the availa­bil­ity heuris­tic is very im­por­tant here, but I’m strug­gling to think of a sin­gle thing in the same refer­ence class (maybe cry­on­ics? MIRI? Nootrop­ics?). If any­one can give me ex­am­ples of “stuff lots of peo­ple on LessWrong liked that could have huge pay­outs”, that would be much ap­pre­ci­ated. • For my part, it was one part triv­ial in­con­ve­niences, one part that it read like woo. I was aware it ex­isted through other av­enues (I wasn’t a Less Wronger then), and aware of what it was try­ing to do, and I had the tech­ni­cal acu­men to get in on it if I had so cho­sen. Given that, I’m a lit­tle bit­ter that I didn’t do so. I could re­tire to­day if I had. I could get into it to­day, of course, but now that ev­ery­body knows it’s a magic money mak­ing ma­chine I sus­pect a bub­ble is well un­der­way. I don’t want to be in when it breaks. I’m a lit­tle wor­ried about Bit­coin’s ex­ter­nal­ities. The min­ing pro­cess con­sumes more and more en­ergy, and pro­fes­sional min­ers are driv­ing up hard­ware costs. Which might be fine if most trans­ac­tions were, well, trans­ac­tions, i.e. if we’re get­ting hu­man value out of the work. But I get the im­pres­sion that the vast ma­jor­ity of the net­work’s effort goes to­wards play­ing mu­si­cal chairs with money, and that seems bad. Bit­coin doesn’t feel woo-ish, any­more, but it’s start­ing to feel pa­per­clippy in­stead. • Yes, pa­per­clippy. And also bit­coin net­work is equal to 10E23 flops now (but cant’t do any­thing else ex­cept bit­co­in­clips), which is 60 times more than to­tal com­pu­ta­tional power of all other com­put­ers com­bined, which was es­ti­mated by Grace. It is re­ally mind­bend­ing and as­tro­nom­i­cal amount of com­pu­ta­tions, and it dou­bles ev­ery 8 months. And it pays peo­ple for its con­struc­tion. • I no­tice I am con­fused. 60 times more than all other com­put­ers com­bined would im­ply that >98% of hu­man com­pute ca­pac­ity is tied up in the bit­coin net­work. That seems...un­likely. • The figure’s mis­lead­ing, be­cause min­ing (these days) is done with spe­cial­ised hard­ware: ASICs, chips ded­i­cated to calcu­lat­ing SHA256 hashes (or what­ever al­gorithm your favourite coin uses), which can calcu­late those ap­prox. times times faster (per sec­ond per$) than a gen­eral-pur­pose CPU—but can’t do any­thing else.

So that im­pli­ca­tion may well be true in the sense that if all the wor­lds com­put­ers turned to min­ing bit­coin, the to­tal min­ing ca­pac­ity would only be in­creased by a cou­ple per­cent over what it is at the mo­ment (due to gen­eral-pur­pose com­put­ers be­ing so in­effi­cient at spe­cific tasks com­pared to ded­i­cated hard­ware). But false in the sense that very lit­tle of the world’s gen­eral-pur­pose com­pute ca­pac­ity is tied up min­ing cryp­tocur­rency.

• 60 times more than to­tal com­pu­ta­tional power of all other com­put­ers com­bined

What are you refer­ring to here?

• I’m a lit­tle wor­ried about Bit­coin’s ex­ter­nal­ities.

I think most such wor­ries are not well-founded, but I would also like to point out that “Bit­coin seems like it might eat the world in a bad way” is not ex­actly a rea­son not to in­vest. It might be a rea­son to fight against Bit­coin, but if you’re not fight­ing against it, it seems like pre­cisely a rea­son you would want to buy it.

• In­di­vi­d­ual in­cen­tives to back some­thing col­lec­tively ter­rible seems like text­book Moloch to me.

(which doesn’t im­ply that you’re wrong, of course)

• When such a situ­a­tion arises again, that there’s an in­vest­ment op­por­tu­nity which is gen­er­ally thought to be worth while, but which has a lower than ex­pected up­take due to ‘triv­ial in­con­ve­niences’, I won­der whether that is in it­self an op­por­tu­nity for a group of ra­tio­nal­ists to co­op­er­ate by out­sourc­ing as much as pos­si­ble of the in­con­ve­nience to just a few mem­bers of the group? Sort of:

“Hey, Less­wrong. I want to in­vest $100 in new tech­nol­ogy foo, but I’m be­ing put off by the up­front time in­vest­ment of 5-20 hours. If any­one wants to make the offer of {I’ve in­ves­ti­gated foo, I know the tech­nolog­i­cal pro­cess needed to turn dol­lars into foo in­vest­ments, here’s a step by step guide that I’ve tested and which works, or post me a cheque and an email ad­dress, and I’ll set it up for you and send you back the ac­cess de­tails} I’d be in­ter­ested in be­ing one of those who pays you com­pen­sa­tion for pro­vid­ing that ser­vice. ” There’s a lot less­wrong (or a similar group) could set up to fa­cil­i­tate such out­sourc­ing, such as let­ting mul­ti­ple peo­ple reg­ister in­ter­est in the same po­ten­tial offer, and pro­vid­ing some fil­ter­ing or guaran­tee against some­one claiming the offer and then rip­ping peo­ple off. • There’s a pro­ject Scott pro­posed some­thing like eight years ago that got started last week­end be­cause some­one posted a bounty on it. Even if the bounty is just beer money, be­ing able to profit fi­nan­cially by do­ing some­thing feels qual­i­ta­tively differ­ent from do­ing it for free. A cen­tral­ized reg­istry of boun­ties would be use­ful. And there might even be a startup idea in there—it’s es­sen­tially We­searchr for out­sourc­ing in­stead of far-right gos­sip jour­nal­ism. • For ex­am­ple, if any­one is plan­ning on set­ting up an in­vest­ment ve­hi­cle along the lines de­scribed in the ar­ti­cle: In­vest­ing in Cryp­tocur­rency with In­dex Tracking with pe­ri­odic re­bal­anc­ing be­tween the cur­ren­cies. I’d be in­ter­ested (with ad­e­quate safe­guards). • It’s one thing to know when to buy, it’s an­other to know when to sell. In hind­sight buy­ing at 1.00 made sense with gw­ern’s logic,(I don’t think I had even heard about bit­coin let alone gw­ern’s ar­gu­ment at the time) but what hap­pens when it rises to 100.00? In that case, the same logic would tell you to sell, in which case if you had in­vested 100.00 you’d have made 10,000.00, hardly a life-chang­ing sum. To have made it to 100,000.00 you’d have had to sit and watch as that not in­con­sid­er­able sum bounces around the hun­dreds range, driven by peo­ple whose only ex­pla­na­tion is “it’s go­ing up” while not mak­ing hardly any head­way in its in­tended pur­pose of be­ing an ac­tual cur­rency used for le­gal trans­ac­tions. The one per­son I know who mined it early on did ex­actly this, he sold it at around the 50.00 point and said it was a bub­ble when it was in the hun­dreds range. I still think he’s right, it was and is a bub­ble; I don’t see the value in some­thing which has no ac­tual value. About the ra­tio­nal­ists win­ning, we already ‘win’ in a lot of ways. We on av­er­age have higher in­comes, bet­ter-man­aged fi­nances, bet­ter health, fewer sub­stance abuse prob­lems, ect, than the av­er­age per­son. But lit­tle of that is due to ra­tio­nal­ism per-se, as these “ra­tio­nal” be­hav­iors are in­cor­po­rated into the gen­eral suite of lifestyle ad­vice given to the av­er­age “normie:” don’t get in debt, don’t ma­jor in that in col­lege, ect. You prob­a­bly fol­lowed them be­fore you ever heard of ra­tio­nal­ism. There are a few ways how­ever that the com­mon ide­ol­ogy of the up­per-mid­dle class peo­ple di­verges from ra­tio­nal be­hav­ior, and which ra­tio­nal­ists would gain an ad­van­tage: 1. On in­fer­til­ity. Don’t get me wrong, few com­mu­ni­ties are as ster­ile as this one, but IF ra­tio­nal­ists de­cide to get mar­ried and IF they de­cide to have kids, I would think they would be more aware of the fact that fer­til­ity takes a nose­dive around age 37, rel­a­tive to a non-ra­tio­nal­ist of similar in­come level. 2. On mar­riage. Ra­tion­al­ists are heav­ily sin­gle, some of that owes to the gen­eral sperg-de­mo­graphic, but I would bet that a lot of them re­main un­mar­ried due to a more ac­cu­rate un­der­stand­ing of the fam­ily court sys­tem and the di­vorce in­dus­try. 3. On rais­ing chil­dren. If they have them, ra­tio­nal­ists will be more likely to un­der­stand the dom­i­nant role of ge­net­ics in shap­ing their chil­dren’s up­bring­ing, and will thus be spared a lot of ex­pense and heartache caused by peo­ple’s be­lief that they can buy IQ points for their child. In all these cases, it’s not any­thing that al­lows one to get rich quick, rather, it’s the avoidance of a po­ten­tially very bad out­come. And that’s all you should ex­pect with the fact that the stock mar­ket is already ra­tio­nal … and the cor­po­rate lad­der largely isn’t.(So our skills are of limited rele­vance there.) • I think the per­centages of ‘suc­cess­ful’ LW read­ers need to be re­calcu­lated. What per­centage of LW read­ers were in the SSC sur­vey, but started read­ing LW af­ter the most prof­itable win­dow for buy­ing bit­coin had already passed? What per­centage were stu­dents with no spare funds in 2011, or oth­er­wise had too lit­tle risk tol­er­ance to in­vest? I started read­ing LW in 2014, took the ad­vice of the 2015 post to the ex­tent I could, but was only able to make a lit­tle money be­cause I didn’t have any sav­ings and 1 bit­coin was worth$200. Later, I heard about ethereum very early on from a friend who bought a bunch and was in­ter­ested in in­vest­ing my­self, but was in the midst of a job tran­si­tion where I again had no spare cash to in­vest. I only re­ported hav­ing ac­quired about $1000 from crypto on the sur­vey, but I count my­self as hav­ing done about as well as I could have, given cir­cum­stances and timing. • Very in­ter­est­ing, and I kind-of agree with the con­clu­sion. How­ever, as a few peo­ple pointed out, it wasn’t as sim­ple as just buy­ing bit­coin, you had to sell at the right time, etc.. And buy­ing bit­coin was com­pli­cated. But the other prob­lem is that there are thou­sands of op­por­tu­ni­ties, things you should do, etc, ly­ing around, with a pos­si­bly good pay­off in ex­pected value terms. And how many of them do we do? How many of them do we even think about se­ri­ously? Just a few off the top of my head (first two are ob­vi­ous, then some oth­ers): 1. Cryo, ob­vi­ously. 2. AI safety—tons of peo­ple in the com­mu­nity agree that’s it’s a se­ri­ous is­sue, but how many ac­tively work to­wards fix­ing it? (A de­cent amount, but I’d guess not as much as the “could” do). 3. CPR train­ing—how many peo­ple do it? What is the chance that you’ll one day be in a situ­a­tion where you need it? I have no idea of the num­bers, but con­sid­er­ing this is a life-and-death situ­a­tion, have you looked up the num­bers and de­cided it’s not worth do­ing? 4. Similarly, buy­ing an emer­gency sur­vival pack in case of a nat­u­ral dis­aster. Again, not idea of the num­bers here, but peo­ple do find them­selves in situ­a­tions where they’re with­out food/​wa­ter for some pe­riod. Do you know the num­bers here to de­cide it’s not worth buy­ing canned goods? 5. How many peo­ple have even both­ered to sit down and make sure their health in­surance/​life in­surance/​un­em­ployemnt in­surance/​etc is han­dled prop­erly? 6. Even more ob­vi­ous—send­ing out re­sumes ev­ery year to find bet­ter job op­por­tu­ni­ties? Or tak­ing a course/​read­ing about find­ing a bet­ter job? This is likely have a mas­sively higher im­pact than buy­ing bit­coin, not only in mon­e­tary terms, but also in life satis­fac­tion im­pact. Etc, etc. Most of the above are pretty ob­vi­ous and triv­ial things al­most any­one can do. I can prob­a­bly list a dozen more, some more “stan­dard ad­vice”, some more out there but still prob­a­bly high in ex­pected value. If I or any­one were to ac­tu­ally sit down and work through these one by one, we’d prob­a­bly do lit­tle else for the next year. So while bit­coin, in ret­ro­spect, may have been the most ob­vi­ous and im­me­di­ately high-value pay­off, I’m not sure it’s easy to seper­ate it from all the other things above. Then again, I’m not sure you should—maybe we should have a list of “these are things you need to take care of ASAP” some­where. • >When I first saw the posts say­ing that cryp­tocur­rency in­vest­ments were a good idea, I agreed with them. I even Googled “how to get Bit­coin” and got a bunch of tech­ni­cal stuff that seemed like a lot of work. So I didn’t do it. Hum. I be­lieved on var­i­ous “weak effi­cient mar­ket” ar­gu­ments, that this Bit­coin was un­likely to be prof­itable. So I didn’t in­vest. Does this makes me worse or bet­ter? I had worse epistemics, but it wasn’t a failure to act on things I thought I were true... • Just for pos­ter­ity and to try to make the suc­cess rate bet­ter next time, you should IMO se­ri­ously look at Ethereum now and de­cide what you make of it. Blockchain-based ledgers of stuff still seem to me like a good idea, the mar­ket has val­i­dated that opinion, and Ethereum is tech­ni­cally far in the front of the curve. (Some com­peti­tors, e.g. Te­zos, Car­dano have rea­son­able-sound­ing ideas but are way be­hind in terms of ac­tual im­ple­men­ta­tion and de­vel­oper man­power be­ing ap­plied.) In the next two years we should see whether Ethereum’s scal­ing plans work out or not. If they do, I can’t un­der­stand any plau­si­ble fu­ture for Bit­coin. My only prob­lem is that it’s con­fus­ing to me to un­der­stand how to com­pute how much an in­di­vi­d­ual ether should be worth—more con­fus­ing than Bit­coin, where it seemed to be com­pet­ing di­rectly with spe­cific tech­nolo­gies like Western Union or Visa and I thought I could look at the fees and ve­loc­ity of money through those as a com­par­i­son. So even if Ethereum be­comes the tech­ni­cal in­fras­truc­ture for a ton of ran­dom to­k­enized soft­ware I’m not sure how to es­ti­mate the fu­ture value of ether as a re­sult. Per­haps I should be look­ing at po­ten­tial tx/​sec lev­els and es­ti­mat­ing de­mand for gas in each case. Dis­claimer: Con­fu­sion notwith­stand­ing, my money is where my mouth is. • Some com­peti­tors, e.g. Te­zos, Car­dano have rea­son­able-sound­ing ideas but are way be­hind in terms of ac­tual im­ple­men­ta­tion and de­vel­oper man­power be­ing ap­plied. To me it seems that EOS is the most vi­able com­peti­tor. The ac­tual blockchain of theirs will go live this sum­mer, but they already have test nets up and run­ning that de­vel­op­ers can use to de­velop ap­pli­ca­tions (though I dunno how easy or hard it is to get started with the cur­rent level of doc­u­men­ta­tion, etc). Some of the ques­tions that de­ter­mine how well EOS does or doesn’t do are: • How de­vel­oper-friendly will EOS be com­pared to Ethereum? This ar­ti­cle ar­gues that EOS will be a bet­ter choice for dapp de­vel­op­ers (https://​steemit.com/​eos/​@nade­jde/​eos-de­vel­op­ment-plat­form-first), with a bit of dis­cus­sion for and against some of the ar­ti­cles points in the com­ments. I don’t have ex­pe­rience with ei­ther my­self, and I don’t know much about what kind of third party code that is /​ will be /​ can be made available for Ethereum to make it more de­vel­oper friendly. • How much flex­i­bil­ity will EOS give for de­vel­op­ers lan­guage-wise? My im­pres­sion has been that lots of the pop­u­lar lan­guages we have to­day will be pos­si­ble to use since they’ll be us­ing We­bAssem­bly. After googling We­bAssem­bly a bit more I’m not as op­ti­mistic about this as I was, but still think this seems to be an ar­gu­ment in favour of EOS vs Ethereum: https://​github.com/​ap­p­cypher/​awe­some-wasm-langs, https://​stack­overflow.com/​ques­tions/​43540878/​what-lan­guages-can-be-com­piled-to-web-as­sem­bly-or-wasm. I don’t know if lan­guages that are well-sup­ported by We­bAssem­bly prac­ti­cally speak­ing will be easy to use to de­velop on EOS, or if C++ in the be­gin­ning or in­definitely will be the de facto choice for EOS de­vel­op­ers, but I’m as­sum­ing that they chose We­bAssem­bly be­cause they in­tend for it to be pos­si­ble to use sev­eral differ­ent lan­guages, so that more de­vel­op­ers can choose a lan­guage they already are com­fortable with. • Prac­ti­cally speak­ing, when can de­vel­op­ers start work­ing on dapps on EOS vs on Car­dano? EOS has a test-net ready for dapp de­vel­op­ers to work on, and will re­lease the main net this sum­mer, though I don’t know how easy or cum­ber­some it is to get started. Un­less I’m mis­taken Car­danos work on smart con­tracts is pretty early stage, and there hasn’t been set a date yet for when smart con­tract func­tion­al­ity will be available: https://​www.red­dit.com/​r/​car­dano/​com­ments/​7q9yq0/​when_will_car­dano_have_smart_con­tracts/​? • Will EOS trans­ac­tions re­ally be free for most users? This seems to be what they claim, and so far I haven’t come across peo­ple ar­gu­ing that this isn’t the case. • Is it the case that reg­u­lar users of Ethereum ap­pli­ca­tions always will have to pay fees, even if these get re­ally low? As I un­der­stand it, one pos­si­ble solu­tion would be to have dapps give the users money for gas. If this be­comes af­ford­able, will it for most dapps be prac­ti­cally doable to “hide” them from users so that it doesn’t make the dapp less user-friendly? I don’t see why it wouldn’t be if gas-fees be­come low enough, at least for dapps where users have to reg­ister ac­counts, but my un­der­stand­ing is vague. Also, this seems to me like yet an­other thing that de­vel­op­ers will have to think about, un­less some easy stan­dard­ized solu­tion be­comes available. • For the differ­ent lev­els of speed, scal­a­bil­ity and low costs of trans­ac­tions, will both EOS and Ethereum get there? And if both get there, who will get there first and how large will the time differ­ence be­tween them be? Take for ex­am­ple steemit.com, a web­site that runs on a blockchain with an ar­chi­tec­ture that is similar to the one EOS will be us­ing. Will it be­come pos­si­ble to have some­thing like that run on Ethereum with­out hav­ing users wait a lot, pay high fees, and hav­ing the net­work get clogged? My im­pres­sion is that if this be­comes pos­si­ble on Ethereum it will prob­a­bly not be a few months af­ter EOS, but years af­ter. Is that im­pres­sion wrong? I don’t have a full overview of the differ­ent up­grades Ethereum are plan­ning and their ex­pected timelines. In this video from Septem­ber 2017 Vi­talik seems to think that Ethereum prob­a­bly will have the ca­pac­ity to re­place Visa in a cou­ple of years, but with pro­to­types with lower se­cu­rity hav­ing that kind of ca­pac­ity in about a year: https://​youtu.be/​WSN5BaCzsbo?t=10m42s. He also seems to think that run­ning some­thing like Star­craft on Ethereum will be pos­si­ble at some point thanks to sec­ond-layer sys­tems. Here are some com­ments re­gard­ing the ca­pac­ity of EOS (the video moves on to other top­ics at 2:02): https://​youtu.be/​UC6RYwYPnpU?t=49s. • How will they com­pare in terms of fund­ing for pro­jects? I don’t know, though I know that EOS has a pretty big “war chest” of money that will be used to fund pro­jects on their blockchain (https://​cryp­tovest.com/​news/​break­ing-block­one-ceo-bren­dan-blumer-an­nounces-1-billion-in-cap­i­tal-for-eos-pro­jects/​). My own guess is that Ethereum will con­tinue to be the num­ber one smart con­tract plat­form, but that EOS will do bet­ter in terms of per­centage­wise growth in price from here. That’s just the guess that feels most likely to me though, not some­thing I ex­pect nec­ce­car­ily will hap­pen. I have read a sig­nifi­cant amount and watched a sig­nifi­cant amount of in­ter­views and so on, but my un­der­stand­ing of this stuff is vague and in­com­plete. I have the ma­jor­ity of my money in EOS at this mo­ment, though I’m not sure if that’s smart of me or not, and am very much un­sure about when I should pull out (now? in a month? this sum­mer?). What makes me most un­sure is the pos­si­bil­ity of a crash of the whole crypto-mar­ket, which may be pretty likely. In the next two years we should see whether Ethereum’s scal­ing plans work out or not. If they do, I can’t un­der­stand any plau­si­ble fu­ture for Bit­coin. Smart con­tracts thanks to root­stock? Scal­ing and lower trans­ac­tion fees thanks to light­ning net­work? More in­vest­ments and us­age due to first-mover ad­van­tage /​ brand aware­ness /​ net­work effects? Th­ese pos­si­bil­ities, which I don’t rule out with my cur­rent ad­mit­tedly shal­low/​vague un­der­stand­ing, makes it seem plau­si­ble to me that Bit­coin could con­tinue to be #1 even if Ethereum scales suc­cess­fully. • From the linked blog post it seems to be that EOS doesn’t provide trust in code be­cause it al­lows a de­vel­oper to make changes in the code af­ter it was first de­ployed. It feels to me un­likely that de­vel­op­ers want to write dapps in any ran­dom pro­gram­ming lan­guage. For dapps it’s im­por­tant to op­ti­mize perfor­mance and com­put­ing is ex­pen­sive and the un­der­ly­ing in­fras­truc­ture is just differ­ent than a nor­mal com­puter and you should’t ex­pect that sim­ply port­ing nor­mal ex­ist­ing pro­gram­ming lan­guages re­sult in a good re­sult. From a se­cu­rity per­spec­tive it’s also very bad. If you look at the prob­lem that brought down The DAO, it sug­gest that you need to think differ­ently about how your code is ex­ectued to not re­peat that mis­take. For­mal ver­ifi­ca­tion seems to be very im­por­tant for dapps and that just isn’t a fea­ture in the ex­ist­ing lan­guages pro­gram­mers already know. • Thanks for this in­ter­est­ing in­fo­dump, I haven’t looked hard at EOS yet (I am bi­ased to­wards only both­er­ing to learn about things which are ac­tu­ally “live in pro­duc­tion” in a mean­ingful way, as a kind of bozo filter) but I will pro­mote it in my at­ten­tion. I agree that Bit­coin could sort of tack on scal­a­bil­ity with pay­ment chan­nels and tack on smart con­tracts with RSK. It just seems re­ally un­likely that it’s a bet­ter idea to do these things on top of a PoW blockchain layer that has tire fire gov­er­nance. It’s definitely true that some kind of worse-is-bet­ter net­work effect* could keep Bit­coin at the top in a way that’s hard for me to un­der­stand—I don’t even have any ex­pla­na­tion for why Bit­coin is at the top as of right now! At the end of the day, though, my origi­nal de­ci­sion to buy Bit­coin and later Ethereum was based on my as­sess­ment of the tech­ni­cal use­ful­ness of the work be­ing done, and since that turned out so well, I’m go­ing to keep rid­ing that heuris­tic un­til I see it not work. *Although it’s in­ter­est­ing to spec­u­late what the net­work would be. Ethereum has mostly caught up in terms of ease-of-ob­tain­ing-and-trans­fer­ring; ex­changes, wallets, node soft­ware, etc. Bit­coin never re­ally hit the main­stream in terms of peo­ple trans­act­ing in it for ev­ery­day things, and due to con­ges­tion it prob­a­bly won’t now un­til pay­ment chan­nels are run­ning and the kinks get worked out. One in­ter­est­ing thing that might be a “net­work effect” is the num­ber of peo­ple with non-portable in­vest­ments into Bit­coin’s fu­ture, e.g. min­ers with Bit­coin ASICs. That’s a lot of cap­i­tal which is in­cen­tivized to make Bit­coin in par­tic­u­lar suc­ceed, and com­peti­tors don’t have that. • I agree. Ethereum has sev­eral trump cards. Namely a se­ries of de­sir­able third party Ethereum ap­pli­ca­tions in the pipeline. For ex­am­ple, Augur, a pre­dic­tion mar­ket on the blockchain. If you want to play on the pre­dic­tion mar­ket, you need to buy ether. I’ll pub­li­cly state that I ex­pect Augur to sin­gle­hand­edly dis­t­in­guish Ethereum from all the other coins. • Ethereum cur­rently has av­er­age trans­ac­tion costs of 1.62$ . To me that seems two or­ders of mag­ni­tude to high for Augur to work de­cently.

That’s even more true when there’s more pres­sure from pro­jects like Augur to make even more trans­ac­tions. Given that Augur it­self is open source, I would ex­pect it to get ported in some way to other coins.

• The hy­potheis that there are plenty of uses for etherium is to­tally com­pa­tiable with the hy­poth­e­sis that Etherium will say be worth 12 it’s price in a year from now.

In other words, even if Etheri­umn has a prac­ti­cal use case, it might very well be that the sys­tem is ac­tu­ally worth 20 billion or some­thing (that is less than its cur­rent mar­ket cap). I’m not sure, do we ac­tu­ally know the maket cap that prop­erly re­flects the as­sumed uses?

• It’s not like the op­por­tu­nity is gone. Mak­ing money on blockchain hype is still easy enough. But it feels more like a bub­ble/​scam now, so I’m out.

• So this is where we are. Cryo: some are tak­ing it se­ri­ously, but not enough. The bet is still open, but yet to pay off. Cryp­tocur­rency: some took it se­ri­ously, but not enough. The bet paid off mag­nifi­cently in the past. It may still be open to a sig­nifi­cant ex­tent, though maybe not with BTC.

Are there any can­di­dates for a cur­rent thing in the cat­e­gory of things that some­one in­formed about, smart, and hav­ing com­par­a­tive ad­van­tage should be leap­ing into? Broad­en­ing from per­sonal gain (al­though that’s my in­ter­est here), maybe x-risk, AGI x-risk, defeat­ing ag­ing, and EA would count. Any­thing else?

• I am not con­vinced that peo­ple in 2011 should have bought bit­coin. If you gave 2011 me the epistemic skills of 2018 me, I would not have bought bit­coin. I don’t know how one could re­li­ably dis­t­in­guish bit­coin from, say, a penny stock that makes promises of 10,000x growth.

Or per­haps a slightly stronger ar­gu­ment would be ven­ture cap­i­tal. Many startup founders have plau­si­ble sto­ries of why their com­pany will one day be worth billions of dol­lars. Surely it’s worth in­vest­ing even if there’s a 0.1% chance that they are cor­rect? But if VCs in­vested in ev­ery com­pany with a story they thought was 0.1%-plau­si­ble, they wouldn’t make any money.

If you could figure out a gen­eral epistemic strat­egy that would lead to buy­ing bit­coin in 2011 but not buy­ing penny stocks, or not in­vest­ing in the wrong star­tups, that would be great. I don’t know how to do that.

This is es­pe­cially a con­cern in mar­kets, where mak­ing an ar­gu­ment that an as­set will ap­pre­ci­ate isn’t enough; you have to also ex­plain why other peo­ple (in­clud­ing very smart peo­ple, and peo­ple whose en­tire job is to find as­sets that will ap­pre­ci­ate) haven’t done it already.

• But if VCs in­vested in ev­ery com­pany with a story they thought was 0.1%-plau­si­ble, they wouldn’t make any money.

This is pretty much ex­actly what they do, if by “0.1%-plau­si­ble” you mean “has a 0.1% chance to give us a 10,000x re­turn”. The vast ma­jor­ity of VC in­vest­ments lose money, and that’s fine, be­cause one 10,000x pays for a lot of failures.

Paul Gra­ham has a good es­say on it: http://​​www.paulgra­ham.com/​​swan.html

Now, that prob­a­bly doesn’t mean VCs shouldn’t filter star­tups at all (though I’d be in­ter­ested to see some­one try that as an ex­per­i­ment). So it’s worth con­sid­er­ing what made Bit­coin “not non­sense”. My first take is that it was a gen­uine tech­nolog­i­cal in­no­va­tion, which also got in­ter­est from a de­cent num­ber of smart peo­ple. But this is a re­ally un­in­tu­itive game. You have to be OK with usu­ally los­ing all your money. Your sys­tem 1 isn’t go­ing to like that.

• My un­der­stand­ing is that VCs only in­vest in about 1% of star­tups, even though prob­a­bly 5-10% of star­tups have rea­son­ably good sto­ries for why they’ll be su­per suc­cess­ful, and where you could ar­gue “surely they have at least a 0.1% chance of suc­ceed­ing, so let’s in­vest in all of them.” If VCs low­ered their stan­dards by 5-10x, they would not make any money; that’s what I was try­ing to say.

The ques­tion isn’t how do you dis­t­in­guish bit­coin from the 1% of star­tups that are worth in­vest­ing in; it’s how do you dis­t­in­guish it from the 5-10% of star­tups that look like they’re worth in­vest­ing in ac­cord­ing to the ar­gu­ments in OP?

• It seems to me that you’re con­flat­ing “suc­ceed­ing” and “re­turn­ing 5000x my money”. I think it’s ob­vi­ously true that most star­tups don’t have a 0.1% chance of re­turn­ing 5000x your money.

No­tice that the most im­por­tant fac­tor in that calcu­la­tion is gen­er­ally not “chance of suc­cess”, but rather “chance of 5000x re­turn, given suc­cess”.

• At the time I took the sur­vey I would have an­swered that I made no money out of cryp­tocur­rency. Since then, I found out that some free cryp­tocur­rency I had for­got­ten about, which was worth less than \$10 at the time, is now worth sev­eral thou­sand. Given that I went to the (small) effort of notic­ing and sign­ing up for the give­away, but only did the long-term-hold strat­egy by ac­ci­dent, I’ll give my­self a D+. I’m also too lazy to sell it for now so hope­fully there isn’t a hard crash.

• Who is our con­trol group? I can think about two can­di­dates:

1) “Ra­tional”Wiki

David Ger­ard (RW ad­min) writes ar­ti­cles about how you can’t ac­tu­ally sell Bit­coins, and those ar­ti­cles get highly up­voted on Hacker News. I would take that as a weak ev­i­dence he doesn’t have any.

2) Logic Nation

Athene (some guy who tried some weird fi­nan­cial scheme on LW, and then started his own cult) is sel­l­ing his own cryp­tocur­rency (ac­tu­ally, two of them; you can use the former to buy the lat­ter).

Seems to me that Less Wrong is somethere in the mid­dle. I guess that makes us merely av­er­age weir­does.

• I’m one of the 15%. Given de­clin­ing marginal util­ity of money , high-risk-high-fi­nan­cial-re­ward bets have never ap­pealed to me; the fi­nan­cial EV would have to be ridicu­lously high for the EV in utilons to be pos­i­tive. I con­sid­ered get­ting some BTC as a cu­ri­os­ity in 2011 but de­cided it was too much has­sle. How­ever dis­cus­sions in the af­ter­math of the 2016 elec­tion led me to con­clude that hold­ing a small amount of cryp­tocur­rency could de­crease over­all risk by miti­gat­ing cer­tain le­gal risks (e.g. money you can mem­o­rise might be good to have if you’re a flee­ing re­fugee), and so I bought some in early 2017, de­spite as­sum­ing that the then-cur­rent price was ba­si­cally effi­cient and so ex­pect­ing 0% av­er­age re­turns. I have of course been pleas­antly sur­prised by the re­turns since then, but con­tinue to make de­ci­sions based on the as­sump­tion of 0% ex­pected re­turns go­ing for­ward. (I’m wait­ing to re­bal­ance out un­til the cap­i­tal gains are long-term for tax pur­poses.)

• 1: Our epistemic ra­tio­nal­ity has prob­a­bly got­ten way ahead of our in­stru­men­tal rationality

I would defend the in­stru­men­tal ra­tio­nal­ity of hav­ing a rule of thumb that un­less you’re quite wealthy, you don’t bother look­ing into any­thing that ap­pears to be a ‘get rich quick’ scheme, or seek to in­vest in high-risk high-re­turn pro­jects you can’t eval­u­ate.

Yes some­times it will fail big, if you miss the boat on bit­coin, or Face­book or what­ever. Every strat­egy fails in some sce­nar­ios. Some­times bet­ting it all on 23 red will have been the right call.

But be­cause it i) low­ers risk, ii) saves you wast­ing time look­ing into lots of dud in­vest­ments to find the oc­ca­sional good one, iii) makes you less of a mark for scams and delu­sions, I think it’s sen­si­ble for most.

• Hmm, now I’m start­ing to won­der if Satoshi is a rationalist

• Hal Fin­ney was Bit­coin user num­ber 2, and is cur­rently cry­op­re­served at Al­cor. There’s been a LOT of over­lap from the very be­gin­ning. Hard to say about Satoshi, though.

• I got a lot of ex­tremely valuable ra­tio­nal­ity ad­vice from Less­wrong, but even if I had read the ar­gu­ments about Bit­coin, I would not have bought any. Like some­one else said, it feels too much like a penny stock.

You migh call Bit­coin “Pas­cal’s In­vest­ment Scheme”

• Is this tak­ing the as­sump­tion that it was a sound in­vest­ment based on its un­der­ly­ing value and there­fore pre­dictable? Or is this say­ing that the ex­plo­sion in price was pre­dictable even if un­jus­tified?

My be­lief on bit­coin is that it isn’t a vi­able fiat cur­rency al­ter­na­tive and won’t be (nor will any other crypto) be­cause gov­ern­ments won’t al­low it. I be­lieve this be­cause it wouldn’t make sense for a cen­tral bank to vol­u­nar­ily give up one of its few eco­nomic lev­ers. A gov­ern­ment could kill the bull propo­si­tion for bit­coin by mak­ing it ille­gal for all trans­ac­tions to reg­istered busi­nesses and mak­ing you pay tax in fiat cur­rency as well. If law abid­ing busi­nesses are un­able to use it then it can’t be a good cur­rency. Then it’s only use­ful as a volatile cur­rency store and for buy­ing drugs on the in­ter­net, al­though cryp­tos with bet­ter anonymity will even­tu­ally take that over.

If you think I’m miss­ing or wrong about some­thing here please let me know. I’m re­ally cu­ri­ous as to how this will play out.

• It seems like you are us­ing the word pre­dictable in a way that’s non­stan­dard. Every­thing is pre­dictable. You can put a prob­a­bil­ity on whether an as­troid will hit earth. The core ques­tion is what prob­a­bil­ity is war­rented and for bit­coin a rea­son­able prob­a­bil­ity as­sess­ment would have sug­gested buy­ing it.

Gold isn’t a good cur­rency and there’s a lot of money stored in it. Similar ar­gu­ments go for ex­pen­sive art that gets brought with the be­lief that it ap­pre­ci­ates.

If you look at the US, the cen­tral bank can’t make laws. It’s a Repub­li­can con­trol­led congress and sen­ate along with a Repub­li­can pres­i­dent who cur­rently do. There are pow­er­ful peo­ple in Sili­con Valley who lobby for bit­coin and Repub­li­can’s don’t want to pass reg­u­la­tion that makes life hard for busi­ness.

• Thanks. I get your first para­graph. That’s what I was mean­ing to say.

On Bit­coin vs Gold: Gold has phys­i­cal prop­er­ties that make it very valuable. It is a great con­duc­tor of heat and elec­tric­ity, the most cor­ro­sion re­sis­tant of all met­als, highly male­able, aes­thet­i­cally pleas­ing and scarce. Gold may have some de­gree of cul­tural/​sig­nal­ling effect driv­ing its price up but I don’t know this for sure.

On Bit­coin vs Art: Art has its aes­thetic value but ob­vi­ously most of the price comes from its cul­tural/​sig­nal­ling value and scarcity.

Bit­coin ob­vi­ously has scarcity in com­mon, but if it doesn’t get mar­ket share as an ac­tual goods and ser­vices trade cur­rency then its in­her­ent value just comes from what­ever other peo­ple are will­ing to pay for it and not what it does (un­less the fast, se­cure trans­ac­tions fea­ture is valuable enough on its own). Nor­mal cur­rency is scarce and backed by the gov­ern­ment and there­fore the en­tire econ­omy of its coun­try mean­ing you can use it to trade for X amount of goods/​ser­vices in that coun­try. Bit­coin is worth USD, which you can use to do all the above, but only be­cause peo­ple are will­ing to pay lots for it. And peo­ple are only will­ing to pay lots for it be­cause they ex­pect in the fu­ture it will be worth more. Even­tu­ally peo­ple will stop want­ing to buy it so then why would you hold it? Then you’d just put your money in stocks to get re­turns again.

I guess the ques­tion I’m re­ally chas­ing an an­swer to is what would a fu­ture look like that jus­tifies Bit­coin’s price?

Re 3rd para­graph: You’re right there. I wrongly as­sumed gov­ern­ment would do the will of the cen­tral bank. In more au­thor­i­tar­ian coun­tries like China this may be the case soI’d ex­pect them to be the first to im­ple­ment such a policy.

• I guess the ques­tion I’m re­ally chas­ing an an­swer to is what would a fu­ture look like that jus­tifies Bit­coin’s price?

The fu­ture used to look like a medium for anony­mous, un­trace­able trans­ac­tions be­yond the con­trol of gov­ern­ments for the sorts of goods that you need that to safely deal in. That was the pri­mary, ob­ject-level sel­l­ing point of Bit­coin. Then Silk Road got bro­ken by law en­force­ment. The newer ri­vals have their own would-be kil­ler apps to give them real value. I’m not sure what Bit­coin’s unique value propo­si­tion is these days. For any­one who has some Bit­coin and is will­ing to say: when did you last use it to buy some­thing, and what?

• Bit­coin is (cur­rently) pretty much use­less as a medium of ex­change. It re­mains of some prac­ti­cal use as a store of value re­silient to cer­tain le­gal risks (e.g. as the an­swer to the ques­tion Eliezer asked in this Face­book post), and in gen­eral with a risk pro­file un­cor­re­lated with other as­sets. Its strength over other cryp­tocur­ren­cies for this use case is based pri­mar­ily on be­ing the most es­tab­lished Schel­ling point. It’s also pos­si­ble (though not look­ing par­tic­u­larly likely) that fu­ture soft­ware changes will even­tu­ally make it use­ful as a medium of ex­change again.

• I think it’s safe to say it doesn’t have a unique value propo­si­tion any­more. It just has mar­ket share.

• I do think that bit­coins cur­rent price is more likely than not a bub­ble that will pop.

But to en­gage with the is­sue I don’t think that any­body buys art­work worth 9 figures of money for cul­tural/​sig­nal­ing value.

If you are in the US with a rel­a­tively trust­wor­thy gov­ern­ment it’s easy to hold USD and be con­fi­dent that it won’t lose much value due to in­fla­tion. The same isn’t true in many other coun­tries.

• I think ex­pen­sive art gets its value from the fact that re­ally rich peo­ple are will­ing to buy it for so­cial sig­nifi­cance. On top of that in­tel­li­gent art in­vesors will also buy it know­ing that rich peo­ple in the fu­ture will still want to buy it, but there will be more com­pe­ti­tion be­cause of the in­creased num­ber of rich peo­ple and the scarcity cre­ated by it be­ing held over time by a pri­vate sel­ler (the longer it gets held the less likely you’ll get an­other chance to buy it in your life­time). What’s your the­ory on where the value comes from?

Agree on your in­fla­tion point. How­ever then your BTC is only a trade away from the less volatile USD. The value pro­pos­tion seems tough with all the su­pe­rior com­pe­ti­tion and bet­ter uses. Kinda psyched for the one with a pre­dic­tion mar­ket at­tached.

• I think that art has scarcity and that leads to rich peo­ple buy­ing it be­cause they think it wil ap­pre­ci­ate in the fu­ture.

If you are in a third world coun­try and the gov­ern­ment raides your house they can eas­ily take all the USD you have at home. On a big­ger scale you have big or­gan­si­a­tions buy­ing mas­sive num­bers of trea­sury bills with nega­tive yields be­cause they don’t want to hold cash.

Even in the US you can have the gov­ern­ment take your money via civil forfei­ture if you carry too much cash around. Num­bers sug­gest that the US po­lice stole more money from cit­i­zens via civil forfei­ture then was stolen in bur­glaries.

• And scarcity, es­pe­cially of any­thing with cul­tural value, gives pres­tige/​sig­nifi­cance to who­ever owns it. Like rich peo­ple buy­ing cool old but rel­a­tively use­less cars. It’s just a cool think to have that ev­ery­one else will think is cool too. Most don’t care about its ap­pre­ci­a­tion. Some may buy it for that pur­pose, but not all.

Valuable art pieces also con­fers pres­tige on any in­sti­tu­tions that hold them. Every­one can og­gle at how much the art is worth and as­sume this must be one of the best mu­se­ums in the world.

Think of it like buy­ing an over­priced but cool pair of limited edi­tion shoes (Yeezy’s or what­ever). Most peo­ple will wear them to show them off, but some peo­ple will never take them out of the box be­cause they know in the fu­ture other peo­ple who want to wear them to show them off will pay even more for them. With art, show­ing it off doesn’t de­pre­ci­ate it so it’s like hav­ing LE shoes that never wear out.

It can’t just be scarcity. Peo­ple have to want the art for some other rea­son for it to have that value. I can cre­ate an equally scarce piece of art by do­ing one paint­ing, sign­ing my name to it and never do­ing paint­ing again. Pi­casso’s are valuable be­cause they are great, fa­mous for their great­ness and scarce mean­ing it’s a big sig­nifi­cant pres­ti­gious thing to own one.

• I de­cided to buy only 0.5 BTC in 2013 as I thought that buy­ing more will re­quire too much my men­tal en­ergy to think about how the ex­change rate changes. The truth is that I still think about it a lot.

I also read a post about Davos-2018 where was said that older peo­ple think that all prob­lems will be solved by AI, and younger ones think that blockchain will solve ev­ery­thing. Surely, LW peo­ple are more in­clide to think that AI will solve ev­ery­thing and it ex­plains the ig­nor­ing of bit­coin.

• I also read a post about Davos-2018 where was said that older peo­ple think that all prob­lems will be solved by AI, and younger ones think that blockchain will solve ev­ery­thing.

I think that (x-risks aside) while for ev­ery thing there is a time at which it will be solved, there will be no time at which ev­ery­thing is solved. How old does that make me? :)