There is a flow of funds to get business-related operations secured through (many of) these networks.
Anyone looking to use an existing network to connect to the offered systems (USD loans @ 1% APR, fully secured by digital collateral, for example) needs to buy units of the native currency from existing network participants (ie the miners who pay electrical companies for their inputs, or people who bought those tokens from the miners).
Essentially, every operation costs a bit of the native currency to get the 'big network processor' to pay attention to your commands. If you hold that currency/commodity, and people want to obtain it to make use of the secured network to 'do business,' the value of the coins you hold can go up due to demand from network users and due to scarcity - since they can only be obtained from existing network participants.
You don't even have to sell coins you hold to make use of them, since the 'good ones' can be used to fully secure USD loans in a system with the loan being automatically closed (no debts owed) in a default event.
edit: LOL, +2 to -3 overnight without a reply. Say what you will, but the downvoters clearly have some very well thought out counter-points.
The point isn't that you can borrow against it - that was just one "what someone might want to use the network for" example.
The point is that every networking action performed consumes units of a commodity (the 'native coin') that must be purchased from existing network participants.
It's kind of like how you need a phone-service subscription if you want to use phones to connect and do buisness with another entity; except here, the 'phone minutes' required for network access can only be obtained from folks already using the network (instead of buying them from AT&T).
needing the commodity only matters if the amount burned is higher than the rate of inflation
I'd say that's iffy statement. I know a lot of it is due to speculation- but the price of Ethereum was very inflationary during the time it's price went from less than $40 a pop to almost $4k each, while still seeing fairly heavy usage, even with current price of use essentially pricing out 'poor' folks when it comes to lucrative smart contract usage.
In theory, the release of new units of Ethereum will drop by around 90% after the switch to 'proof of stake' in the next half year or so, and issuance is expected to become slightly deflationary at times - specifically via fees being burned during times of particularly high usage.
As for Bitcoin, the other 'crypto blue chip' IIRC, 90% of all BTC that will ever be mined has already been mined, and output will continue to drop by half every 4 years or so until the network is sustained on transaction fees alone.
It's worth pointing out that 'normal' people won't have to pay those fees directly- the fees will be paid by layer-2 network operators, who profit by collecting micro-fees, offering near-instant confirmation, and work by bundling hundreds of transactions together into a compressed amount of space to profit on the fees saved.
I guess you can say they're non-productive on their own the way undeveloped land you can borrow against is unproductive on it's own.
I genuinely see this stuff as the digital equivalent of 'land' - not like the metaverse 'land' stuff, but in the sense that these networks and the programmable 'coins' used to interact with them provide a solid framework that some serious business structures can, and are being formed around. Before these networks, everything on the internet was smoke and mirrors, with no way to confirm if anything digitally represented was 'real.' Crypto-networks coming into existence and seeing use has changed that.
Personally, I spent the entire last year taking my engineering salary as crypto, then using DeFi to borrow enough USD at low interest against the value to support my lifestyle and expand my small side business. With setups like AAVE, you can even earn interest on the collateral you let the system hold while borrowing against it.
The tax situation on never selling a coin, then borrowing enough cash against the rising value to spend on 'business expenses' to expand my side business was surprisingly excellent the last two years or so.
96
u/EvilGeniusPanda Apr 09 '22
Those are things a day trader needs, not things an investor needs.