Link more claims.
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# Crypto is a solution for the unbanked
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Crypto is not a solution to unbanked, because by its [deflationary](../concepts/deflationary.md) design it [cannot function as a currency](is-bitcoin-currency.md) that is usable for purchasing goods and services.
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The purpose of retail banking services is to provide stable, reliable and safe means for citizens to transact with money that is safely custodied by a trusted third party with the guarantees of regulation by the government that the party will hold their accounts on their behalf. This includes practices like customer service, deposit insurance, fraud detection, transaction reversal and issuing of payment cards.
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[Crypto exchanges](../concepts/crypto-exchange.md) cannot function as banks because the do not custody customer deposits and have no deposit insurance. This pushes unnecessary counterparty risk down to consumers and in the event of fraud, insolvency or market shocks customers may be left with no access to their "deposits". This is an unnecessary risk that is strictly worse than traditional banking products.
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# Bitcoin can funtion as a currency
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# Bitcoin can function as a currency
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Unlike the namesake of "cryptocurrency" might imply, [bitcoin](../concepts/bitcoin.md) is not a [currency](../concepts/currency.md). It does not fulfil the economic definition of [money](../concepts/money.md). Instead bitcoin is best understood as a [speculative](../concepts/speculation.md) [cryptoasset](../concepts/cryptoasset.md) or [gambling](../concepts/gambling.md) product.
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Since bitcoin is not issued by a sovereign state or [central-banks](../concepts/central-banks.md) there is no central party to manage the [deflationary](../concepts/deflationary.md) spirals that occur in the [price-formation](../concepts/price-formation.md) of the asset. Therefore it is subject to wild and uncontrollable volatility that makes it unsuitable as a *means of exchange*. No amount of technology can fix the volatility problem as it is a function of the economic design of the asset and its fixed supply. This arises out of the political imaginaries of the [neo-metallism](../notes/neo-metallism.md) school and [austrian-economics](../concepts/ideologies/austrian-economics.md) that informed the design of the bitcoin to resemble the historical [gold-standard](../concepts/gold-standard.md) and the conception of heterodox ideas of [sound-money](../concepts/sound-money.md).
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As evidenced by real world context there are very few businesses that are willing to transact in bitcoin because of the price volatility. Companies that attempt to do this, such as Tesla, effectively issue an [option](../concepts/derivative.md) in which the goods or services payed are quoted at a strike price and if the transaction is reversed or goods returned the amount will be returned to the customer in a different currency at the strike price. This terms commerce into a [security](../concepts/security.md) transaction and is a taxable event.
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Bitcoin cannot form the foundation for an economic system because its volatility makes it unsuitable for issuing debt or loan products without extremely large risk premiums to factor in the price risk of the counterparties on long time scales. This makes common products like mortgages nearly impossible to denominate in bitcoin.
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Since bitcoin is [deflationary](../concepts/deflationary.md) it encourages hording instead of spending on [productive enterprises](../concepts/productive-asset.md). This results in mass [market](../concepts/market.md) consolidation and accumulation instead of an environment in which commerce is encouraged. This property makes bitcoin completely antithetical to the entire project of a [currency](../concepts/currency.md) which definitionally exists to be spent.
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# Crypto assets are legal
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Crypto assets are unlicensed [security](../concepts/security.md) contracts for unregulated [speculative](../concepts/speculation.md) investments. The legality of this depends on jurisdiction.
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# Investing in crypto assets is a negative-sum game
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Investing in crypto assets is a [negative sum game](../concepts/zero-sum-game.md) as defined in game theory and economics. Negative sum games result in a net loss across participants and multiple losers associated with every one winner.
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Since crypto assets are [investments](../concepts/security.md) the purpose of buying a crypto asset is to buy it at a lower price and sell it at a higher price to generate a return denominated in a [real currency](../concepts/currency.md). However as an investment crypto assets have no [income-cashflows](../concepts/income-cashflows.md) therefore the only money that exists to pay out investors is money that is brought in by later investors. This makes the entire scheme a [zero sum game](../concepts/zero-sum-game.md). All money won by [speculation](../concepts/speculation.md) is ultimately money that is equally lost by another participant.
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This is comparable to the analogy of a game of poker and other [gambling](../concepts/gambling.md) games The only money that can be won in a poker game "pot" provided by the players of the card game. The act of playing poker does not generate any money, it simply redistributes to participants according to a game of chance. If the "house" or casino takes a percentage of the pot on every round of the game played then the size of the pot must decrease over time. This turns the zero-sum game into a negative-sum game which admits a negative [expected return](../concepts/expected-return.md).
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Investing in crypto assets is statistically guaranteed to lose money for almost all market participants because as investments they have no [income-cashflows](../concepts/income-cashflows.md). This differs drastically from [productive-asset](../concepts/productive-asset.md) such as [stocks](../concepts/stock.md) and [bonds](../concepts/bond.md).
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See [assets](../concepts/assets.md) comparison chart for comparison of crypot assets to productive asset.
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# Crypto has a weird subculture
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Crypto currency is an example of a [high-control-group](../concepts/high-control-group.md) to develop the [narrative-economics](../concepts/narrative-economics.md) to entice people to invest in the asset class. Since the asset class is [negative-sum](negative-sum.md) it depends largely on inconsistent narratives that clash with orthodox [economics](../concepts/ideologies/keynsian-economics.md) and depend on [technosolutionism](../concepts/ideologies/technosolutionism.md) to justify bringing more [greater fools](../concepts/greater-fool-theory.md) into the scheme.
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Crypto culture depends heavily on a distortion of language to signify belonging to an ingroup and leans heavily on [thought terminating cliches](../concepts/thought-terminating-cliches.md) to quell dissent or rational discourse.
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## References
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* [@golumbia_bitcoin_2015]
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* [@olson_line_2022]
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# What type of assets are crypto token?
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## Currency
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Crypto assets are [securities](../concepts/security.md) contracts.
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## Security
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See the [assets](../concepts/assets.md) comparison chart for an overview of how crypto asset compare to traditional investments and currencies.
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## Commodity
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Crypto assets are [not currency](is-bitcoin-currency.md) because they cannot fulfil the definition of [money](../concepts/money.md).
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## Art
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## Ponzi Scheme
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Crypto assets are not [commodities](../concepts/commodity.md) because they have no intrinsic value needed to fulfil any productive economic activity or human need. Their definition of [use-value](../concepts/use-value.md) depends on a circular argument.
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Crypto assets may also be a form of [[art]] under the fuzzy definition of "artistic intent".
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@ -15,12 +15,15 @@ Understand the terminology used to describe crypto and web3.
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* [bitcoin](/concepts/bitcoin.md)
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* [ethereum](/concepts/ethereum.md)
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* [blockchain](/concepts/blockchain.md)
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* [currency](/concepts/currency.md)
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* [money](/concepts/money.md)
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* [sound-money](../concepts/sound-money.md)
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* [deflationary](../concepts/deflationary.md)
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* [assets](/concepts/assets.md)
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* [speculative asset](/concepts/speculation.md)
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* [crypto-exchange](/concepts/crypto-exchange.md)
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* [bubble](/concepts/bubble.md)
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* [dao](/concepts/dao.md)
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* [private-money](../concepts/private-money.md)
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### Claims
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3. [How do we value a crypto token?](/claims/valuation-model.md)
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4. Are crypto assets a systemic risk to the economy?
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5. Are cryptoassets are being used to build a new internet?
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6. Are crypto tokens a negative-sum investment?
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6. [Are crypto tokens a negative-sum investment?](/claims/negative-sum.md)
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7. Are crypto tokens a predatory investment?
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8. Is bitcoin the basis for a new gold standard?
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9. Is bitcoin mining harmful to the environment?
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10. Are crypto assets a risk to the state?
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11. Are crypto assets legal?
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12. Is crypto a solution for the unbanked?
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11. [Are crypto assets legal?](/claims/legality.md)
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12. [Is crypto a solution for the unbanked?](/claims/crypto-unbanked.md)
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13. What is the narrative economics of crypto assets?
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14. Is web3 the next generation of the internet?
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15. Is web3 even a well-defined term?
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16. [Why does crypto have such a weird subculture?](/claims/weird-culture.md)
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## Contextual
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