(2017-05-23) Thompson Tulips Myths And Cryptocurrencies

Ben Thompson on Tulips, Myths, and Cryptocurrencies

Charles Mackay’s account is almost certainly completely wrong. (Asset Bubble)

Mackay was right that there were insanely high prices: those prices, though, were for options

tulips in fact were becoming more popular, particularly in Germany, and, as the first phase of the 30 Years War wound down, it looked like Germany would be victorious, which would mean a better market for tulips. In early October, 1636, though, Germany suffered an unexpected defeat, and the tulip price crashed, not because it was irrationally high, but because of an external shock.

One of the biggest applications of this functionality is, unsurprisingly, other cryptocurrencies. The last year in particular has seen an explosion in Initial Coin Offerings (ICOs), usually on Ethereum.

One of the big recent risers, Ethereum, is exactly that: Ethereum is based on a BlockChain, like BitCoin, which means it has an attached currency (Ether) that incentivizes miners to verify transactions. However, the protocol includes smart contract functionality

This has the potential to be particularly exciting for the creation of decentralized networks

do you get people to join a brand new Network? You give people partial ownership of the network…

This is a huge deal, and probably the most viable way out from the antitrust trap created by Aggregation Theory.

The implication of this article is that comparing Bitcoin or any other cryptocurrencies to stock in an individual company probably doesn’t make complete sense.

2019: see this article

  • The plague did, however, play a role in creating the tulip bubble in a different way, Goldgar says. “There were people who had a bit more cash because they had acquired some extra money from relatives who had died.”
  • But where the myth of tulipmania claims that long chains of people were affected by the crash, Anne Goldgar says that it was actually only a small number of people who were involved in the trade. And even those people hadn’t lost fortunes.
  • Goldgar says the tulip bubble shook Dutch society in a different way. It had brought about the idea that people could rise in society through speculation—not hard work or a noble lineage.
  • It’s is the beginning of a major shift in how the Dutch economy and society worked, and not everyone was ready for that. In pamphlets and popular songs, Goldgar sees a clear sense of schadenfreude when the tulip bubble bursts. One which she sees repeating itself in financial crashes through history. And in 2019, when you hear people complaining about Bitcoin and warning about it, what you are hearing are the voices of people in 1637 saying: you shouldn’t be involved in this trade. You’re the wrong person, you don’t know enough. That’s part of the moral tone that I think is quite interesting, that only greedy people get involved in this kind of thing—and they need to control themselves.

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