# Last edited on 2014-01-29 13:19:46 by stolfilocal

[quote author=TooDumbForBitcoin link=topic=178336.msg4816334#msg4816334 date=1390996526]
[quote]And they will invest all their money in "shares" of a "Bitcoin Corporation" that has [s]no[/s] billions in assets, [s]no[/s] a diverse range of products ...
[/quote]

FTFY
[/quote]

In a normal corporation, people who buy the shares at the initial public offering (IPO) are effectively lending their money to the company. The company will use that money to build factories and such, thus creating new wealth, wether in goods or services.

Each share of that company is a fraction of those assets, and entitles the owner to a fraction of that new wealth -- as a fair reward for having forfeited the use of his money for several years.  When an original investor sells his stock to another long-term investor, he is taking back the money that he lent, and yielding any future profits to the buyer, who now has [i]his[/i] money tied up.  In any case, the profit that those long-term investors earn - dividends and profit in long-term stock trade - comes from the wealth that the company creates.

Besides those long-term "true" investors, there are also speculative traders who buy and sell stock over fairly short periods, in order to profit from variations of the market price - variations that are often created the speculators themselves, consciously or unconsciously.  While the speculators too have their money tied up in that game, the lucky ones may profit much more than the wealth created by the company in that interval.  This extra speculative profit of couse comes at the expense of unlucky speculators, especially novices.

With Bitcoin, Satoshi Nakamoto actually created two "corporations", that are quite different from the classical ones.  

One is the "Cryto-Currency Network" (CCN) which comprises many workers and equipment, and performs some services that are useful to society; but has no owners and no stock.  

The other is a virtual "Bitcoin Corporation" (BC) that has no assets, no workers, no products, etc.; but it has 21 million public shares out there -- the Bitcoins -- and thousands of owners -- the people who own Bitcoins.

The IPO of the virtual Bitcoin Corporation raised no money from investors.  Satoshi and friends kept a few million shares for themselves, and the rest were essentially scattered over a certain crypto-space, for miners to find.

Many other "virtual cryptocoin corporations" (VCCs) have been created after BC, basically with the same attibutes. All of them pure stock, with no assets, products, dividents, etc..

The Crypto-Currency Network is essentially a global distributed stock exchange where people can trade only one type of stock -- the shares of those virtual cryptocoin corporations.   Apart from speculative trade, the CCN is meant to do a useful service to society by allowing people to use shares of VCCs as a means of payment, instead of national currencies.  That is the same service that banks and payment processors like PayPal provide now, only that is meant to be much cheaper, faster, unrestricted, etc..

The "assets" and "employees" of the CCN are the result of people voluntarily joining the Network, lending their equipment to it, and helping manintain the blockchains of the various crypto-corporations.  The CCN does not directly charge money for its services; instead it rewards its workers with the "lost" VCC shares (unmined crypto-coins) that they occasionally find as a result of working for the network. The new wealth created by the CCN -- its services as a payment processor -- is basically distributed to the people who use it.

As for the BC and other virtual cryptocoin corporations, since they have no assets or revenue, the price of their stock is determined entirely by speculative trade.  None of the money that people spent buying their shares (crypto-coins) was productive investment: it did not buy equipment for the Network, or anything that could generate new wealth.  The profit one may obtain from trading VCC stock does not come from new wealth created by the VCCs (which do not create any), nor by the Crypto-Coin Network (which gives all its created wealth to its users); it all comes from the losses of less fortunate VCC stock traders.

So we have a precarious situation where the earnings of CCN workers depend on their luck as miners and on the value of VCC stocks -- which, being largely defined by speculative trade, bears little or no relation to the actual value of the services rendered by the CCN.

This arrangement seems to be quite new in the history of finance; no wonder that governments are still scratching their heads about it.  Market regultors like the SEC historically have been hard on companies who misrepresent their assets and revenue. But what should they do with a "company" that issues stock at zero price, and openly declares that it has no assests or revenue, and never will?