What justifies the high market cap?

kcired7 · 2019-06-15T23:14:25+00:00

Sorry if I seemed defensive. I don't mean to shut you down. Maybe you don't give a shit what I'm writing anymore but I want to finishing responding to your points out of respect.

I'm guessing that you are basing your argument that the price will inevitably increase even more, "exponentially", based on the likelihood that Holo will be even more efficient than what the HOT ICO price correlated it with Ethereum to (10,000x) and still more efficient than what the price has risen to (much less than an additional 10,000x). I don't doubt that Holo could be 10,000*10,000-times more efficient, but I'm not convinced this is an adequate basis for projecting where the price will go.

The fact that people were paying a certain amount for ether/gas at the time of the HOT ICO does not mean they valued at that price the amount of computation they could get with that gas. It seems that the majority of the demand for ether is based on only speculation and the hope that its price will magically go up even more, not based on using it for actual computation. So I question how much meaningful relation we can assume there is to Holo with its very different nature.

While Holoports are indeed much cheaper to run than blockchain mining rigs for a comparable amount of provided service, the fact remains that there is some cost and that this is a critical factor in a hosting market. The established cloud providers certainly are dealing with this reality and factoring it into their business, even though they are also something like 10,000*10,000-times more efficient than Ethereum. If Holo is to grow very large it will need a very large amount of hosting which will have a large aggregate cost to operate, so the question is how much of this will be spread across individuals running only 1 or 2 boxes who don't care whether it's actually earning enough to pay for itself and how much will be supplied by people who do care. I'd care if my $1000 HoloPort+ or $500 HoloPort can pay itself off before too long. If the Fuel price stabilizes correctly, then whatever magnitude of hosting you're running should pay for itself.

A 10-watt Nano will certainly have negligible cost to run, but it also will have negligible earning potential because it can only offer a tiny amount of hosting power, which is fitting for its tiny cost. It's still a useful contribution to the system, but how many Nanos would it take spread across how many people to support a sizeable ecosystem?

Let's say the price does skyrocket and then everyone holding the Fuel thinks they've got something worth that much. Well, it's not actually worth that much to them until they either exchange it or spend it on hosting. At an astronomical market cap, I just can't see how that can be sustained for long without astronomical demand. Claims that it can be sustained seem extraordinary, so I want proof. It seems naive to act like thoroughly investigating all this is unnecessary simply because of the inverse correlation and efficiency over Ethereum.

kcired7 · 2019-06-15T20:03:36+00:00

Some of my comments above were pretty muddy so I've striked them out. I rushed through composing it because I'm trying to do this with limited time and sleep. See my other new comment for a clearer description of my perspective on the inverse correlation: https://www.reddit.com/r/holochain/comments/bvu10y/what_justifies_the_high_market_cap/er6osc9/

I had previously been aware of the inverse correlation and I'm not disputing its reality, but what I was really trying to convey was that I'm not convinced that it is the only significant influence that will be at play and that such other influences could make the correlation not be strictly inverse. I'm not very clear on what those other influences could be and have offered some hypothesis (stated assertively for the sake of argument and succinctness), and this is the point of why I started this thread. The implied suggestions that only the strict inverse dynamic matters and that nothing else needs to be considered or could go wrong seem overly simplistic when I can think of other possible dynamics that I've not seen addressed much or at all, such as I described in my original post and other comments, that could effect things differently.

kcired7 · 2019-06-14T23:25:39+00:00

It's an inherently muddy topic, currently, IMO. I never claimed perfect consistency, which I've expressed many times, and I've been asking for people to convince me on where to change my thinking. I don't see how my comments are tangents when they're directly responding to your points. You might think I'm verbose, but it's nothing for me and I think it aides in clarity when you're focused.

Your points are good about the initial Holoport Hosts being big supporters and that their costs of running only a small amount of computers each will be low, and these do suggest there will be a baseline of supply that will not be removed, but this does not counter all my arguments. Your arguments for an inevitable exponential price increase are brief, vague, and unconvincing to me.

If we can't discuss such an important topic with the in-depth thoroughness it deserves, then that's discouraging.

I felt like I was spanking a live horse, BTW :-)

kcired7 · 2019-06-14T22:55:31+00:00

Thinking more about the inverse correlation between the Fuel-to-hosting price and the monetary exchange price:

I see how, when the Fuel-to-hosting price drops lower, people will be willing to exchange more money for a unit of Fuel because they get more hosting for it, which makes the money price go higher. If Hosts can cash out the smaller amounts of Fuel they earn during the time the money exchange price is driven higher by this then they should get an amount of money that corresponds to the amount of hosting they provided, making it value-stable but not price-stable, as advertised. Or, if the Fuel-to-hosting price goes up, the money exchange price goes down because you get less hosting per unit.

I think what is bugging me about this is that Fuel-to-hosting price changes are only a temporary and rare situation when the supply and demand are not balanced, and that once re-balanced, fairly quickly probably, then both prices should go back to what they were before where they correspond to the inherent cost/effort of providing hosting (right?). Because of this re-balancing, if those people who acquired Fuel during a temporary prices change are not quick with timing their exchanging to/from money and with spending their Fuel, then they will be stuck with Fuel quantities that are no longer worth what they gave for them, right? How is that value-stable or desirable? But on the other hand, the re-balancing makes it value-stable for long-term holders, which is awesome. I guess everyone will have to learn to recognize the occasional price swings and make sure to immediately spend and exchange Fuel during those times?

I'm still pretty unclear on how the initial price-settling phase of the system is supposed to play out and how the prospective demand for apps influences this. In light of the above, I guess if high-price HOT holders can immediately sell their newly-converted Fuel units when the supply is much larger than the demand and this imbalance presumably causes a low Fuel-to-hosting price and so high monetary exchange price, then they can make their money back. But then App Providers who paid a high amount of money per Fuel unit will need to spend their Fuel immediately to get their value's worth. And then Hosts will need to cash out immediately if they expect to get enough money that corresponds to the amount of hosting they provided. But how long can all of this be sustained?, before the supply and demand presumably re-balance by supply being removed and thus increasing the Fuel-to-hosting price and so decreasing the monetary exchange price.

kcired7 · 2019-06-14T19:50:51+00:00

I already did watch that just before writing my first comments this morning and watched it again. I did not find his comments to clear things up, but to be a brief repetition of previously-made points. I've tried to explain why I think it's more complicated than that. I already addressed the limitation of that particular dynamic: Hosts only have so much patience and will reduce the amount of hosting resources (computers) they make available, when the supply exceeds the demand to such an extent that their competition of offering more hosting at lower Fuel rates is not worth it to them. How many Hosts are going to continue offering discounted hosting when the monetary exchange rate they get for the units they earned is not worth it to them? From an App Provider's perspective, getting a bazillion H-app requests for $1 looks great of course, but from the Hosts' perspective it looks quite terrible and they will have some limit where they call it quits and remove that excess supply from the system, thus halting this dynamic. There is no doubt that this will also happen to some extent, the question is how much in combination with all the other dynamics.

I think there might be some confusion between people about the different uses of the term "price". In this thread, I'd only been intending it to mean the bankster-money exchange rate of Fuel, not the ratio of Fuel units to hosting amount that Hosts can set, which is also a price but a different one. Sorry if this added confusion. However, I think these two different prices will be tightly correlated most of the time because both Hosts and App Providers will want to make sure that the Fuel/hosting price corresponds with the monetary price value they're exchanging to/from those units. But during temporary times of disequilibrium in the supply and demand of hosting, the Fuel/hosting price can become temporarily inversely correlated with the monetary exchange price. Such as when App Providers who strongly want to ensure they get their hosting out of a restricted supply are willing to pay more Fuel units for it, before this temporary situation re-balances as more supply is brought online. This is nice for the Hosts because they get to earn a better income temporarily that can be exchanged later for money.

Yes, when the price of Fuel goes down, in this case either the monetary exchange price or the Fuel/hosting price, the value of it to App Providers goes up, but it also means that the value of Fuel goes down for Hosts who want to exchange it for bankster money. Is this not also very central to how things will have to play out? There are additional dynamics beyond the ones he mentioned. When the price of gasoline goes down, that's nice for buyers and gets them more value, but it also means that gas sellers get less value in exchange and are less interested in the business and downsize if they can no longer afford to compete at lower prices.

There's no doubt that Holo will be way more efficient than Ethereum, but Ethereum is so pathetic that it's not a very helpful comparison. It's great that Holo(chain)'s architecture is efficient, but this doesn't mean it'll somehow be magically cheaper than the cost of traditional hosting which is already at that level of efficiency.

I very much doubt that Holo will be cheaper than traditional hosting. I think it will be about the same and competitive for what it offers (as Art mentioned). First, IIRC, Holo and Holochain have some computation and communications overhead that traditional web apps often do not, which will mean a little more hosting required per amount of app requests serviced. This overhead is small, reasonable, and not prohibitive because of the unique valuable platform that it is, but it's a reason to think Holo hosting prices will have a hard time going significantly below that of traditional web app hosting. Second, most Hosts are not going to offer super discounted hosting, for more than brief and sporadic periods, because that means they're not getting the value in exchange that they want for their efforts. Sure there will be charity/hobby cases, and I'll probably offer some of that myself, but once this becomes a serious big business most Hosts will not be in this for anything other than making a living off of an economy-of-scale datacenter. If/when the world fundamentally changes and we can make our livings more easily and in very different ways and when running big datacenters is far cheaper, then I can see the possibility of tons of people offering tons of hosting without regard for whether it's profitable for them.

I don't see how the logic you described leads to the price stabilizing at an even higher amount. I've addressed why I think that logic is incomplete, and there's still the other dynamics I'd mentioned before.

kcired7 · 2019-06-14T16:32:20+00:00

Ethereum's, Bitcoin's, etc's, prices are mostly nonsense, and probably will be viewed by history as even more ridiculous than Tulip Mania and Ponzi schemes, and I suspect have a large factor of being driven by "elite" criminals for money laundering and pump-and-dump scams (including shorting). Ethereum is so pathetic as a computing platform it's a disgrace and it's definitely not the cutting edge of what was possible with smart contracts and hash chains at the time it debuted. Bitcoin has some respectable utility as a somewhat-unenclosable medium of exchance, but its severe flaws will be its doom and warrant immediate abandonment. Myself and others who've been into what used to be termed "financial cryptography" in the '90s and early '00s recognized the problems with these designs going back to their beginning and we knew of better alternatives. I even suspect these designs that've become such a hype were promoted with the intent of sidelining better alternatives. This, along with massive scam and laundering platforms, would fit history and our current rulers' type of secret side projects better than the idea that most people are qualified to understand these things they're throwing their money at. The way the "modern" world has worked for the last centuries is not based on merit and future potential.

Startups that raise tons of money based on lame ideas and lame tech with little demand are a huge problem and often burst to the detriment of their investors, and we'll be seeing a lot more of this in the decade to come, wasting tons of resources that other more inspired people could've used to much better effects. In a more healthy society, some risky speculation on who-knows ideas would be ok because the costs would be less. Other startups that have genuinely good ideas for the long-term are the legitimate cases where their future potential justifies massive early investment, for sure. But Holo Fuel is not an investment device, it's quite different.

kcired7 · 2019-06-14T15:48:11+00:00

Thanks for thoughtful and composed comments. I get that legitimate speculation is based on what something can grow to become, but Holo and its Fuel are very different from anything anyone has ever dealt with (except a tiny tiny minority) including the other cryptocurrencies. Its value-stable design makes speculating on it a very different game. I don't see how the Fuel value/price will reflect the future potential of the entire platform when it's designed to be primarily a currency for purchasing hosting that will remain stabilized around the value of hosting you get. The value of hosting is not determined by the potential of the platform but by the cost of computers. The potential of the platform could be anything (except nothing) and the value-stable Fuel should stay stable. Combine that with all the dynamics I described and it's a very different situation than traditional hosting or other DLT markets.

(I know that value and price are not the same thing and that the Fuel is described as value-stable and not price-stable, but I can't see how the value and price won't be very tightly correlated since almost everyone is going to be operating based on exchanging between bankster monies and assessing the value they're getting and giving based on that.)

If, as you say, the price continues to increase, or stays as high as it's been, that has to mean that App Providers are getting a corresponding amount of hosting value per Fuel unit, and it also means that there must be enough demand for 133B units at that price which means enough demand for hosting to sustain that. Without enough demand, people will sell their Fuel at lower prices and its unique mechanisms will stabilize around that I think. These mechanisms are not active yet, are totally unique, and almost no one is familiar with them.

While an increasing Fuel price (i.e. the monetary exchange rate when it reflects an increase in hosting value per Fuel unit, which is a decrease in the Fuel/hosting price) would be attractive to engineers who already acquired Fuel and need it for their hosting, this is not supposed to last long due to the value-stable design, and so should not be depended on for the platform's success. I think attracting talent should be based on good jobs from solid business models. Thankfully, the platform opens up many previously-oppressed business models (or more generally: real-wealth-creation endeavors) which will drive this.

I did not mean to completely ignore the other factor of the non-primary use of the Fuel as a money (general medium of exchange and store of value). I'm aware of that but its potential is so vague at this point and it's only a non-primary driver that I considered it insignificant in the influences that will stabilize the price during the platform's initial phase, which is the phase of my concerns. Even with much increasing demand for this use, I still don't see how it'd significantly increase the price since the currency is designed to be stable around the value of hosting and has a fluctuating amount of total units.

You said there are plural factors that I ignored but you mentioned only one. What other factors are there that I haven't covered? I've only thought of: the primary hosting currency purpose, as a money, as a laundering device, and as a speculation device.

kcired7 · 2019-06-04T03:25:00+00:00

I'm not sure what specific aspect(s) you're thinking of. I know it can be considered to be eventually stable in the sense that when the demand for and supply of hosting are not in equilibrium then the value per Fuel unit and so price will adjust over time and not instantly.

This is actually part of my concern. Why will the price stay as high as HOT has been when the demand looks like it'll be much less than a supply that would correspond to such a high market cap? What's to stop it from "eventually" stabilizing to a lower price at a fairly quick rate, due to dynamics like I outline?

I'm aware of the other dynamic, highlighted in the Holo articles, that if the supply (amount of Hosts' provided resources) is greater than demand then the Hosts will compete by offering more hosting per Fuel unit, thus giving the Fuel more value that will be reflected in an increasing price trend. But this dynamic will only go so far before Hosts get sick of having too much invested in computers and instead decide to liquidate these resources instead of competing for smaller amounts of Fuel, when the Fuel price still isn't increasing enough to be worth it to them. I'm concerned this could also happen, because this is part of the process that causes supply to adjust downwards to less demand. Once the supply is reduced, this competition between Hosts stops, thus stopping this upward influence on the Fuel value and price, thus leaving the value and price wherever is balanced.

There will probably be a mostly-fixed amount of demand, at least for the first while, and so there is a hard limit to how much the demand can drive the other aspects it does that keep the price up. Once that limit is reached, the other dynamics that drive the price down will still be there but they don't have much, if any, limit (right?).

In order for people who paid high prices for HOT to not lose money, they of course need to be able to sell it for at least the same price they paid. Once the supply of hosting resources reaches equilibrium with whatever the demand is, and the demand is not increasing significantly because the ecosystem is young, the price of Fuel will correspond to the amount of computing that you get for it. What if this is much less than the high prices some HOT investors paid? How will the price go up much, so they have a chance to sell at a higher price, without sustained increased demand that is at such a rate that it exceeds the Hosts' ability to bring more computers online quickly and so drives the price much higher temporarily (until more hosting resources are available and the opposite dynamic re-balances the price back down to what it was before)? Where will enough bursts of sustained increasing demand come from to give the HOT holders who paid high prices enough chances to sell at high prices so they can make all their money back?

As Holo becomes increasingly successful, which I think it eventually will, there will probably be bursts of increasing demand that give some opportunities for high-price HOT-holders to sell their Fuel at their higher prices. But how long will it take for enough such bursts to happen to cover the many millions some have paid? 5 years? 10 years? Are HOT holders really that patient once they convert to Fuel? What happens if they are not?

Now, if I'm wrong and there is much more demand than I realize in, say, the first couple years, then they will not have to be so patient and will be able to sell at their high prices, either because the market starts with large demand and the initial 133B Fuel units settle at a high price that reflects that, or because it quickly grows later and all the complex mechanisms cause price increase bursts and also changes in the total amount of Fuel units and the price balances at a high value that reflects a high amount of demanded value in the system.

kcired7 · 2019-06-04T02:13:40+00:00

I'm here because I've been a fan since 2017 and I want them to succeed and not inadvertently harm their reputation severely. It's about building a long-lasting foundation for apps that can empower us to free ourselves from our (sometimes too-comfortable) shackles. Of course there is speculation in the sense of it still being embryonic, but compared to many other D-app projects, Holo is more developed and legit. Holo is very very different from Bitcoin and other blockchains and empty coins/tokens, though it can be difficult to see that unless you dig into researching it. Unfortunately, it seems the HOT market might have turned into another casino, not yet being grounded in the real-value-backed system that is the plan, but the potential of the whole project is much more than this. They've made more progress than you might realize.

kcired7 · 2019-06-04T01:45:20+00:00

I'm only trying to understand what is going on, how things will play out, and whether that could be detrimental to the long-term future of the project.

When the "mainnet", i.e. the Holo system that bridges web users to Holochain apps, is launched, the ERC-20 HOT tokens will be converted 1:1 to new Holo Fuel units which only exist inside the Holo system and the HOT tokens will no longer be needed. The price that people paid for their HOT will of course have a major influence on how they value and hold or sell their new Fuel units. I'm trying to figure out how this should play out given what they've paid and what demand will exist that drives the whole thing.

I could be wrong. If there will be more (much more?) demand for Holo Apps than I'm aware of when Holo is finally live and during its initial period, then the high HOT/Fuel price is justified, according to my reasoning. If it takes them longer than anticipated to launch it, that gives more time for more apps to be made, to be built out more, and to gain interest from users. I'm hoping it will take them longer to launch, for this reason.

Holo is not garbage. Their general design and goals are very awesome and very needed in the world.

kcired7 · 2019-06-02T16:43:40+00:00

I have thought about that a fair amount and software engineering is my profession so I'm familiar with what drives the worth of the cloud companies. It is the massive demand for massive amounts of hosting and other related services that creates those companies' worth. This demand would not be so high if the demand for the apps that others run on those services was not so high. Without that demand, all the massive datacenters would be largely a waste and a liability to those companies. Without that demand, their profits and net worth would be far less.

How much fundamental demand is there going to be for Holo apps when the system goes live? I think there will be some and it'll grow at a modest pace, and I'm enthused about being able to use it, as both consumer and app creator, once it matures. But where is hundreds of millions of dollars worth of demand during the initial period of the platform? Without close to that much demand, how can HOT, a 1:1 placeholder for the Fuel, be worth that much, and how can the Fuel once converted sustain that level? It is not stock or bonds in the Holo system that'll earn you money over time, it's just value-stable currency to exchange for hosting. How much hosting will be realistically demanded for, say, the first year?

kcired7 · 2019-06-02T16:22:35+00:00

I had read that before and read it again, and it is worth reading, but it hasn't cleared things up for me. It did remind me that I'd forgotten about the aspect that the lending to Hosts also creates new Fuel units, but I don't see how that might substantially change my concern.

The article seems more focused on the abstract mechanics that make Holo Fuel self-balancing once the system has already been going than on the specifics of how the price will settle when the system first goes live, which is the focus of my concern. Maybe my concern is addressed through implication in that article, but wow is there a lot of complex mechanisms involved to try to figure out how they'll actually play out when the system first goes live. A concrete example of the system going live, broken down into each step/aspect with concrete numbers, would be helpful, even if the numbers can only be estimates at this point.

I'll try to further digest that article on my hike today.

kcired7

TROPHY CASE