Speculation: The Unseen Computer
It's a mistake to equate speculation with gambling. Speculation is an inseparable part of crypto, it is the main compute engine of markets and a propellant force of the civilization.
I. The Role of Speculation
Unlike the sub-atomic scale which as suggested by quantum mechanics is probabilistic, the universe at the scale that we humans interact with is actually deterministic. This means that if we had a perfect understanding of all inputs we could perfectly compute the future. In practice, we do not have perfect and complete inputs or the computation needed to calculate the future. As such, we find ourselves approaching the future in probabilistic terms. Speculation is not a degeneration but a tool that allows individuals to reason about the future state of the world in probabilities. In other word, speculation is a low-computation method for dealing with uncertainties. It has been an essential tool in human survival and progress.
II. The Role of Markets
Markets are the evolution of individual level speculation, allowing a collective to hypothesize about future in the presence of information entropy, chaos of complex systems and reflexivity introduced by inclusion of many agents.
As the number of inputs and complexity of the relationship of these inputs increase the difficulty of speculation about the outcomes also increase. On the other hand, by increasing the number of speculative agents who all put skin in the game based on their own set of information and computation as nodes, the accuracy of the collective increases. The price reflects the collective speculation of all agents (market participants), each contributing their piece of information, however imperfect or incomplete.
This collective speculation is the market. With full acknowledgement of claims that “real communism hasn’t been tried before”, I am going to go on a limb and say that our civilization cannot coordinate without markets.
Thus, speculation is a net-positive at the civilizational level. Even though an order book is a zero-sum where gains one side of the book are losses of the other, at a magnitude of scale higher than the order book itself, the speculation is net-positive for the collective. Without these speculative agents we will not be able to have accurate pricing, universal pricing (as opposed to local), or enough liquidity to transact in meaningful quantities. As unholy as it sounds, traders, hedge funds and speculators at large provide irreplaceable value to our civilization.
III. The Role of Gambling
Equating speculation and gambling is to equate Football to 1700s-style line-infantry battles. One is the real thing, the other is made to scratch the itch that appears in the absence of the real thing. At the individual scale, battles and football might equate, but at the collective scale they affect the populace differently. The same way, at the individual scale, gambling feels similar to market participation subjectively for an individual, but at the collective scale market participation is a net-positive while gambling is zero-sum at best. Equating the two is caused when we evaluate the acts in the wrong scale.
Equating speculation with gambling and condemning both is common practice in Keynesian and Marxist schools of economics. Where as, Austrians and Neoclassical economists emphasis the importance and positive force of speculation.
There is quite a bit of gambling that is optimized for as “usage” within the crypto industry. It is fair to discourage this optimization function — after all, gambling is not positive-sum. Though, equating speculation with degenerate gambling would argue against the main value proposition of crypto.
IV. The Role of Crypto
Others have spoken at length about shortfalls of “blockchain not crypto” in solving any civilization scale problems, so I will not. Crypto is a coordination tool and its largest meta-application is solving the issue of digital-native ownership. Crypto assets represent value, ownership and transfer of it. It’s through digital-native ownership that crypto and web3 create any of their sub-applications.
Ownership without speculation is a confused oxymoron at best, and a maligned marxist take at worst. Speculation is an inseparable part of crypto.
V. The Role of Finance
Finance and financial instruments are the set of tools and pipelines facilitating efficient market-wide speculation.
Finance and financial instruments are not inherently useful in and of themselves. The value is derived from the economic activity that they facilitate, akin to a set of pipelines or transportation infrastructure that facilitates activity of a city but does not cause it. The Wall Street facilitates the financing and pricing of the Western economy.
Decentralized Finance (DeFi), similar to Wall Street and traditional finance are just a set of tools, pipeline and infrastructure that facilitate efficient financing and speculation over crypto assets. DeFi provides a set of tools to operate markets on top of crypto-native infrastructure.
Today we have the infrastructure but no economy to service.
Today, crypto is a ghost town. A city with transport and water infrastructure that has no people and no economic movement. Ghosts towns aren’t uncommon in top-down, centrally planned systems. The infrastructure-first approach to funding and building in crypto is the equivalent of top-down, centrally planned building of cities. The more natural approach is the app-infrastructure cycle approach. Infra first is waterfall. App-infrastructure is agile development.
There are two forerunner arguments for what will be the economies that DeFi will be the financial infrastructure for. Some believe DeFi to a more transparent and efficient replacement for the pipelines of the old economy (TradFi). Others, myself included think that DeFi is a financial infrastructure for net-new web3-native economies — economies that never existed or were even possible prior to this technology. I have in the past discussed the dual path for adaptation of technologies in societies, either streamlining old economies or allowing creation of new ones. For example, the internet brought along things like Expedia which are streamlining of brick and mortar travel agents. The internet also brought along innovations like Airbnb which are expansion of both supply-side and demand-side of short-term personal home rentals, creating markets that weren’t possible at scale before: a net new economy. Other examples of streamlining is digitized news papers and radios while blogging and podcasts were net-new phenomena.
VI. The Role of Gambling in Crypto
I am biased towards net-new economies but I find pursuit of streamlining Wall Street to also be a noble aspiration. What’s left us with degenerate gambling isn’t which one of these two we choose to build. But rather the fact that we have built a financial infrastructure layer that has not found an economy atop it to service.
Speculation is not a 'casino phase' that crypto is going through -- it's an inseparable property of ownership. It's gambling that is not inevitable a result of top-down gonzo investments, bad measurement metrics and early liquidity. The Casino is simply what appears if we build pipelines that do not have an economy to facilitate.
Instead of subsidizing growing economies we’ve incentivized usage of our financial infrastructure without measuring the sum of the equation, only looking at our terms and minuend and mistaking them for addends. When DeFi Summer first kicked-off, folks used “subsidies” and “incentives” to describe the yield farming phenomena. In retrospect it’s clear that we did not subsidize a positive sum but, just incentivized a zero sum.
VII. The Path forward
Speculation is an inherent part of crypto. Gambling is not inherent. Gambling is what we’re left with in absence building real economies on top of our infrastructure.
The path forward is:
To not incentivize but subsidize where achieving scale is not possible without such subsidies. The difference is that incentives are concerned with the left-hand side of an equation while subsidies care about the right hand side. If the right-hand side is remaining zero-sum, it’s not subsidy — it’s not speculation, it’s gambling.
To use the correct metrics. TVL is a left-side-of-the-equation metric. It is agnostic of the economic value of an application, merely obsessing about sheer usage, perhaps fallaciously assuming all usage is positive-sum.
To break the top-down gonzo investments based on the infrastructure myth and embrace the app-infrastructure cycle.
Collect this post as an NFT.
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If you believe in the Perez framework (https://avc.com/2015/02/the-carlota-perez-framework/), then trying to recreate Pump on Ethereum not only has cultural headwinds, but market headwinds as well The next era of crypto is about production capital, not financial capital. Capitulating to speculation now is a laggard move
Agree, though IMO it's less about speculation and more about high churn/short duration games. It's unsurprising that they can get really popular really fast, but it's the furthest thing from a reliable long term commitment.
Sufficiently advanced high churn/short duration games are indistinguishable from speculation :)))
Topkek, but srsly I'd argue that at best we're working with a poor definition of speculation. Speculation in an objective sense has a lot of value, we can (and must) speculate on long time horizons, both on low risk and high risk endeavours. Everything relies on speculation, but that doesn't make pumpfun everything.
👀👀
how do you know that the exuberance era is over?
I don't -- I could be wrong. My gut says that FTX was the true collapse and that memecoins were an echo bubble But even if we have a bit more installation mania left, the shape of it will look different from pump So if you want to bet on that, better move is to figure out what comes after... NFTs -> memecoins -> ???
it could be. frenzy ends with institutional changes and maybe that’s what it’s going on right now but it feels like crypto is just too wild to tame
I agree strongly, I've even spoke to great lengths about this phenomenon (albeit had no idea this framework existed or was explicitly outlined the way it is or that this article suggested it was an inevitability for crypto), but the one thing I ask as an open question: what parallel in history had a case where a titan existed during the left side of the curve also existed and was a titan during the right?
That’s a great question — won’t claim to have the best examples, but Amazon is a notable one Worth recognizing that the titans on the right side end up being much much bigger (because of longevity and the TAM of real use cases being orders of magnitude larger)
Amazon's an interesting one, because many companies would kill for the market cap they had during the bubble era, but I'd argue they were nowhere near a titan back then given the ambition they had
I agree with all this , any examples of production capital projects leading the way?
https://www.cnbc.com/2025/02/04/stripe-closes-1point1-billion-bridge-deal-prepares-for-stablecoin-push-.html
The age of easy alchemy is over. If you’re still chasing gold from hype, you’re reading the wrong chapter
change my mind: warpcast rewards is just an airdrop except it can’t easily be farmed, everyone with an account is always eligible, and you don’t have to worry about the price of the token tanking 50% within hours of getting it
just because it’s USDC doesn’t mean it’s not a token
If we make the psychology of how people make decisions primary over the topology of the exchange, I’d say it’s different. Airdrop is used in the context of a potentially big gain due to wild speculation. So it’s easier to justify spending time on it. How people think about it > what it is CMV
you’re still speculating except you’re speculating on your own content
Airdrop used to mean a reward post facto for doing stuff onchain, without expectation of said reward....this feels more like that, as opposed to the current incarnation of 'airdrop'
I know to usually sell within 3 days because that's usually peak Then buy back a few days after that depending on the strength of the future IMO *Use the $5 USDC toward whatever coin you like the most or want to support. That's what I started doing 👇 https://warpcast.com/degenveteran.eth/0xc9b79860
an airdrop is about decentralizing the ownership of a protocol. Warpcast rewards is more like the TikTok creator fund.
I get airdropped fiat by my employer every two weeks 😅
it's a repeat claim with a tougher proof.
or an acclimating proof? stablecoins were always going to be the ideal airdrop cryptocurrency.
By owning the token of a protocol you become aligned with the protocol USDC doesn’t really do that outside of the criteria to earn it
this is a good point and agree that’s how most tokens should work but have seen it play out differently in theory vs practice, esp bc most people participate in an airdrop to make $$ not because they find the product particularly compelling
Unless the protocol is the United States of America.
Lol that’s one way of looking at it
Technically, it's an airdrop, but from the business experiment side, it's a different experiment. Warpcast rewards are 1. Repeatable. 2. Consistent. 3. Transparent 4. Measurable
I like this framing
I think usdc makes it very different because it requires skin in the game from warpcast, where as airdropping their own token is basically free. There's also no speculative dynamics set in motion (knowing when to sell, people shilling and whatnot)
Lmao Please make that “everyone with an account” clear please 😅
well it depends on your definition of airdrops, yes in your case it makes sense, but so are salaries. imo an important criterion for airdrops is them being a distribution mechanism for your native token. I may also have been too (brain)washed from the 2019-2021 cycle.
no sweeter sound to my ears than all-in discussing @polymarket for the entire first section also hosted a meetup last night and every single person knew polymarket — not all of them knew why it was different from polls, but it clicked after a quick explanation
except then some of the guys proceeded to go “I’m bearish on crypto” and I was like “wait polymarket is crypto” and they were like “no we would say that’s blockchain not crypto” interesting
oh gosh 'blockchain not crypto' is still a thing?
these are all really smart people who are either founders or engineers interested in new technologies they’re turned off by “crypto” but curious about “blockchain” so yes it’s still a thing and maybe why we still haven’t made a dent towards mass adoption
I think when they say crypto they mean speculation on tokens and by blockchain they mean everything else. So with that framing I understand where they’re coming from. But given the technical definitions it comes across as nonsense / cringe / naive
genuine question: what's your best response to it? Fwiw I think it's a valid distinction
didn’t know it’s still a thing
web3 Where the b stands for blockchain, and the 3 stands for the number of double takes a skeptic has to do before admitting that their only problem with crypto might be their own definition of it
Where is there a successful deployment of a blockchain that's not in crypto?
to clarify their POV: they’d say crypto is in blockchain, not vice versa as you put it they’d say polymarket, figure, etc
I also avoid saying crypto and say blockchain instead.
Did you dig any deeper on what they meant by “blockchain not crypto”? Seems like that phrase has been recycled over the years
i imagine 'crypto' implies cryptocurrencies, tokens, casino stuff for these folks. polymarket is USDC but on blockchain rails, hence blockchain not crypto
asset class vs technology
this sentiment is not entirely wrong: it's a protocol on which you can speculate on sentiment, but with no 100x upside normally and certainly no scams, criminals a la SBF or rugs - which are the price many paid in the past to win in the crypto casino. or do I have a poor mental model of polymarket?
I typically say blockchain because crypto or crypto currency reinforces the idea that it's made up money, which it is, but it's also much more than that.
The question is, will Polymarket continue being relevant after the election? Transitioning for that perfect use case and find pmf on another one will be challenging.
How did you explain it to them? What clicked?
Hi ted!!!
You know it’s bad when a TECH person is talking about externalities. The majority of tech people I know simply do not care about negative costs to anything. Making Money Is Good “Progress” Is Good And they do not care who they hurt, what they damage, or what we lose in the process of those 2 things. Perhaps tech bros care about plastic because it’s a consequence they can’t be isolated from. 100% of people, plants and wildlife have to deal with this https://x.com/karpathy/status/1826372336213524715
It’s actually getting crazy tbh
It’s essential to balance these goals of making money with a commitment to environmental responsibility Just my POV
I'm reminded of the meme/cartoon of the older lady responding to the youngin' accusing older lady of not being "green enough" I used chatgpt to get a shorter list of her reply: Bottle Reuse: Returned milk, soda, and beer bottles for wash/reuse. Paper Bags: Used reusable brown paper bags for groceries & book covers. Walking/Biking: Walked/biked instead of using cars for short trips. Cloth Diapers: Washed & reused cloth diapers. Clotheslines: Dried clothes on a line using wind and solar power. Hand-Me-Downs: Passed down clothes between siblings. Manual Appliances: Used hand-powered kitchen tools and push mowers. Water Fountains: Drank from public fountains instead of single-use bottles. Refillable Pens and Razors: Refilled ink pens and replaced razor blades instead of discarding them. Public Transport: Used streetcars, buses, and bikes for transportation. Minimal Electronics: Had fewer electronic devices and smaller TVs. Recycled Packing Materials: Used old newspapers for packaging instead of bubble wrap.
source: https://forum.polkaudio.com/discussion/197261/a-young-clerk-gives-an-old-lady-a-hard-time-about-the-environment
What a great list. It’s wild how everything from clothes to appliances has become disposable. I still have clothes i wear from high school, but I doubt anything I buy today will last me as long as those have
We got em! I also think this is my biggst issue with e/acc. Like sure we can accelerate things, but have you ever considered that things can remain bad for a very looong time. And that maybe you only hold this view because you have sufficient privilege to shelter from it.
To me acceleration is worthy of contempt because it elevates technology and science to the place of God. There is an almost religious faith in technology to solve all the problems and know all the things. If we make 100 problems in the course of innovating to solve 1, well we will just add more science on top to solve those 100 new problems. Externalities along the way do not matter. and yes you’re right often they never have to experience the consequences! Recently Marc and Ben of a16z went on a tirade against a newspaper who photoshopped MAGA hats on Ben and his wife. The fact they did this, while their firm funds a company that profits off of non-consensual deepfake porn, is emblematic to me of the whole situation. We, the people, get a16z financed porn made in our likenesses because profit, because progress. We are faceless human capital and we can be sacrificed. But one mildly ‘shopped photo for them and they are burning the boats. Why do we have to take this?
This is related to what you highlighted in the other cast about people in SF reading books and overly indulging the mind When you look at everything through the lens of the mind, of course you fall in love with technology - it’s the mind infatuated with its own creations (aka narcissism)
Apparently, the tech person is Raw, being so driven by the positives such that it outweighs any negative outcomes isn’t so bad to me, but do you think there’s a lingering negative consequences of this ?
you literally work in tech.
I know and I carry a lot of guilt for being complicit in behavior and projects that make the world worse, even if I am not a leader or ultimately responsible
so maybe log off the tech app lol
It’s important to recognize these issues and even if you're not in a leadership role your awareness and willingness to address it can make a difference
Yeah some people in the tech industry might be more focused on profit than people I still think there are also many who are committed to making a difference tho How do you think we can push for more sustainable and responsible practices at least, better future for everyone yk?
it's because most of the externalities are vague and unprovable "social media makes people feel worse" or "disinformation is ruining democracy" are a lot less concrete of claims than "everyone has microplastics in their balls, check the X-ray" tech people want concrete evidence regarding the claims over what is causing what externality
I see this a lot in movies, I really didn’t think people were that heartless in real life
speculation is the plant https://paragraph.xyz/@kia/speculation
he just walk around and talk about this sort of nonsense all day. makes me want to nap.
whats the phenomenon called where demand for speculating on the asset is larger than demand for the asset?
inb4 "crypto" lol but looking for a srs reply
tulip fever?
> the term tulip mania is now often used metaphorically to refer to any large economic bubble when asset prices deviate from intrinsic values. this checks out
though one thing i'm getting at is i'm not sure if this is always a "bubble" ie something that will "pop" - but rather the speculative demand might end up sustaining and just becoming baked into the "intrinsic value"
speculation doesn't necessarily mean bubble.
the phenomenon is called gold
"financialization"
the earth
I don't think I would be back in crypto if it weren't for Farcaster got super burnt out on the concept of speculation – money chasing "projects" that may not create anything except higher resale prices I came to Farcaster for the people. Crypto won me back by showing me it can turn community into an economy
Two pieces I like on the topic of speculation & economies, from @six and @kia: https://onchainletters.xyz/microeconomies?referrer=0x1234567890 https://paragraph.xyz/@kia/speculation?referrer=0xA1A750080E96293dcEb237c76B9Ca10C20E1B49f
I thought this channel might enjoy this A meditation on the memecoin phenomena through the lens of death anxiety. https://paragraph.xyz/@kia/i-own,-therefore-i-am
Maybe I'm just jaded but I don't think about memecoins as ownership, more as the fastest way to the digital top or hehe memes > Memecoins are not controlled by the fed or the big tech. They can be fully owned in a digitally native way.
yeah I feel you. I think ownership and speculation arebasically the same thing. linking to a previous essay about this. wanted to signify the move from sharing memes to putting skin in the game, owning/speculating them. https://paragraph.xyz/@kia/speculation
my choice of word could've been a little less obtimized on making the Cartesian part consistent tho. 😅
"Speculation is not a 'casino phase' that crypto is going through -- it's an inseparable property of ownership... The Casino is simply what appears if we build pipelines that do not have an economy to facilitate." Great piece from @kia on the role of speculation in society
temperature check: should i write an essay about explaining this or is it too obvious? too often I hear people saying "insurance" for things that are just categorically 'extremestan' and cannot be insured. options, CDSs and prediction markets are the gwei.
ok seems like there’s sufficient interest. will be writing this. will take a while. in the meantime here’s the previous piece for people newer to the channel. https://paragraph.xyz/@kia/speculation
500 $DEGEN