The Intellectual Incoherence of Cryptoassets: A Product Management Perspective

The Intellectual Incoherence of Cryptoassets: A Product Management Perspective

Cryptoassets, or cryptocurrencies, have gained significant attention in recent years. Many people see them as a new and exciting investment opportunity, while others view them with skepticism. In this article, we will explore the intellectual incoherence of cryptoassets from a product management perspective.

One of the fundamental issues with cryptoassets is their similarity to equity investments in companies. However, unlike stocks, cryptoassets lack the underlying business that generates revenue. This makes them strictly inferior to traditional assets like stocks, which pay dividends or engage in stock buybacks to reward investors. In contrast, cryptoassets rely on the continuous influx of new investors to pay out early token holders. This creates a system where the value of the asset depends solely on the willingness of future investors to buy in at increasingly irrational prices.

To describe this phenomenon, some have suggested adopting the German compound word "schneeballsystem" or snowball scheme. This term captures the essence of how cryptoassets operate, with early holders profiting from the investments of later participants. The lack of a clear word to describe this new type of investment highlights the confusion and uncertainty surrounding cryptoassets.

In order to consider cryptoassets as a store of value, we must assume an infinite chain of greater fools willing to buy these assets at any price, no matter how irrational. This assumption is illogical and unsustainable in the long term. It relies on the constant influx of new investors, creating a speculative bubble that is bound to burst. Without a solid foundation of intrinsic value, cryptoassets become nothing more than a game of speculation.

As a product manager, it is essential to apply common sense to investment decisions. One of the best pieces of advice I received early in my career was to never buy financial products that I don't understand. This wisdom holds true in the world of cryptoassets, where confusion and complexity reign. Despite all the noise and excitement surrounding these assets, it is safe to say that very few people fully understand them.

So, what can we learn from this intellectual incoherence of cryptoassets? As product managers, we must approach new and emerging technologies with caution. While the idea of decentralized currencies and blockchain technology is intriguing, we should not blindly invest in assets that lack clear value propositions.

Instead, let's focus on three actionable pieces of advice:

1. Educate ourselves: Before diving into the world of cryptoassets, take the time to understand the underlying technology and the dynamics of the market. Knowledge is the key to making informed decisions.

2. Diversify investments: Instead of putting all our eggs in the cryptoasset basket, diversify our investments across different asset classes. This will help mitigate risks and protect our portfolios from the volatility of the crypto market.

3. Consider the long term: Rather than chasing short-term gains, think about the long-term potential of investments. Look for assets that have a solid foundation of intrinsic value and are backed by tangible assets or revenue-generating businesses.

In conclusion, the intellectual incoherence of cryptoassets highlights the need for caution and skepticism in the world of investments. As product managers, it is our responsibility to approach new technologies with critical thinking and a focus on long-term value. By educating ourselves, diversifying our investments, and considering the long term, we can navigate the complex world of cryptoassets and make informed decisions.