Is S.MPOE really worth that much ?!

I tell you, this has been the most difficult question I encountered so far in my life.ⁱ

The banal counterarguments are easily dismissed. For instance :

MP still controls 95% of the shares. He has a complete corner on it's trading. If the value isn't going up from his direct manipulation, its a result of the fact that so little of the total amount is available. (Easier to keep a high trading value with artificially reduced supply).

The problem with this argument is two fold. On one hand, if I didn't have 95% of the shares, but I had their equivalent BTC value this argument would be equally strong in fact (even if the proponent couldn't still argue it, because then their argument would simply become "no matter what MP is manipulating the price", which is hardly an argument). This alone should suffice to show it is specious, and indeed, the fact that Warren Buffett controls billions of dollars does not immediately imply that the value of any enterprise worth less is completely controlled by Warren Buffettⁱⁱ.

On the other hand, S.MPOE shares are widely available to shortⁱⁱⁱ. This absolutely necessary mechanism for healthy price formation, which tellingly is not available in most fiat markets should also be sufficient to dismiss the manipulation theory, both practically (if you really believe they're overpriced then you have to explain why you aren't making money at it) and theoretically (you also have to explain why nobody else seems to be making money at it either).

For another instance, critics are quick to point out that the BTC is traded on MtGox at 13.5 dollars or whatever it is traded at, which would put S.MPOE somewhere around 8 million dollars, which would be excessive.

Well, would it ? Facebook sold itself at a valuation of a hundred billion dollars^iv, on revenue of about 500 million dollars (that's 0.5%). MPEx makes 0.5% in a good month^v (BTC, obviously). So maybe it's undervalued by a degree of magnitude ? Maybe two, why not. After all, FB does not have room to grow anymore.

Even rephrasing this in the more proper "share of M3" approach, and observing that 600`000 BTC is a little over 2% of all the BTC that will ever exist this argument fails to carry. So there's going to at some point be 50 businesses in BTC just as big as MPEx ? Possibly. Where are they ? Currently there's maybe five, and by this rationale MPEx is still undervalued.

Obviously simply dismissing counterarguments does not amount to making an argument, and I find myself stumped in any attempt to. Why exactly is S.MPOE the largest venture by market cap in Bitcoin land ? By everyone's logic it shouldn't be : if indeed it has a website (which is arguable at best) it doesn't use bootstrap ; it's not welcoming to new users ; it's not open to the technologically challenged ; it's not open to the poor.^vi. All these are capital sins as far as the groupthink goes, and I guess the fact that MPEx is BTC's foremost financial institution^vii stumps them just as much as the fact that its share price went up 3`000% in six months stumps me.

However, a random discussion on irc might actually have illuminated the entire thing :

Anduck Are _you_ trusted? Who are you? What do you do?
mircea_popescu o.o

Anduck What makes you trustful?
mircea_popescu Well, I am the mircea popescu of MPEx.

Anduck I know.
mircea_popescu A ok. So that's what I do.

Anduck What makes people trust you?
mircea_popescu Mmm. Prolly best ask them ?
mircea_popescu ;;getrating mircea_popescu
gribble WARNING: Currently not authenticated. User mircea_popescu, rated since Fri Jul 22 08:04:26 2011. Cumulative rating 100, from 46 total ratings. Received ratings: 45 positive, 1 negative. Sent ratings: 56 positive, 7 negative. Details: http://bitcoin-otc.com/viewratingdetail.php?nick=mircea_popescu
mircea_popescu There's a list.

Anduck Don't you know yourself?? Do people know you irl?
mircea_popescu Btc people ? Not rly. But if you come by Timisoara you can buy me a drink.

Anduck Ok. Well why do people trust you. If I made a exchange and named it "anducks exchange" , would people use it?
mircea_popescu Possibly not at first. It's been going for a while tho.

Graet Lol. Trust is built. People act in a trustworthy way and people trust them.
Anduck Well. Pirate built a nice trust and then boom scammed.
thestringpuller Mircea makes me money. Usagi loses me money. Do the math.

mircea_popescu Graet his q is pretty stumping tho. I mean, why do people trust one!
Anduck thestringpuller: I guess pirate made you monies too xD
thestringpuller pirate lost me money and I had 0 exposure.
Graet Asking someone why ppl trust them is a rather loaded question. Ask some of the ppl that trust him why they do would makle more sense :)
Anduck Well... Graet: have you met him irl? Do you even know where he lives? What makes him not to run with your moeny?
mircea_popescu I think some people met pirate or else someone hired for the job at some point.

Graet No, but I havent met you either, nor most of the 250 odd ppl that trust me and mine on my pool.
Anduck People STILL think pirate will come back and pay-WILL HE? Yeah they met pirate. They met pirate and so pirate got like 100k more btc from them or something.
Graet So meeting someone proves?
mircea_popescu Graet arguably tho, much less trust is needed to mine on a pool. At most they lose a few days' hash.

Graet Indeed.
mircea_popescu Then again, there was that pool-cum-ponzi combo recently.

Graet My point is trust is built, not just given.
mircea_popescu That's for sure. Moreover, if someone knew why people trust them they could hack more trust I guess.

thestringpuller Ukto: usagi run assets are bad news but dont take our word for it.
Anduck Graet: well do you have any kind of agreement on anything
Graet Anduck, agreement with who?
Anduck I mean.. with mircea_popescu.
Graet No. He interviewed me for his magazine ~ 18 months ago. Apart from that we have chatted on irc. I dont see your point.
Anduck What if mircea_popescu now took all the monies xD
mircea_popescu Agreement to what ?

Anduck And ran. mircea_popescu: tell me what makes you not to run with the money?
mircea_popescu Nothing makes me. Hence, trust. Graet o right I recall!^viii

Graet ;)
Anduck Well... people trusted _some random guy from internet_ with their life savings (btcst). Wasnt it enough a lesson ?
Graet Indeed. I wasn't one...
Anduck Me neither. I am not saying mircea_popescu isnt trustful.
mircea_popescu Anduck people get divorced all the time, is that a lesson not to get married ?

Anduck Duh.
Graet Fuck yeah.
Anduck Bad example!
Graet I need a 2nd. Divorce that is :P
mircea_popescu Lol ok. Ok, I got a better one maybe. Cars crash all the time, is that a lesson not to drive ?
Anduck Lol. But you drive the car yourself.
mircea_popescu Anduck for some values of "yourself".

assbot [MPEX] [S.MPOE] 13550 @ 0.00062 = 8.401 BTC [+]
thestringpuller mircea_popescu: I made a script to tell me how much money you've made based on the shares left. 1800 btc richer ;) err 6200*
mircea_popescu ;;calc (10000000-6702311)* 0.00062
gribble 2044.56718

mircea_popescu 'bout 2k. Incidentally, maybe this is a good answer for anduck. I'm currently worth some 10s of k's in cash and some 100s of k's in stock. It makes no sense to run off.
thestringpuller You are retired. Where would you run to?
Anduck Sell all shit n run like ni...ni...nig....RUNN!!

mircea_popescu I was, but I came back out of it. Nobody can stay retired for long before they're 60 or so I don't think.

Basically... the market, invisible hand, collective consciousness, whatever you want to call it is pricing S.MPOE in such a way as to give me a rational incentive to stick around because it needs me and not having the cognitive ability of talking to me directly it can't trust me in the human sense of that term.

In other words... ok this is pretty big but, in other words, S.MPOE is becoming monetized. If you don't readily understand the macroeconomic implications of monetization or exactly what it means, here's a lengthy but I think illuminating piece : On monetary restandardization.

I am sort of blown away by this theoretical realisation. I am by no means convinced it is even correct, but merely the suggestion of it has the sort of breathtaking effect sudden abstraction gives. The reason I'm publishing all this is, of course, that I'm interested to hear what others think. Fill me in below.

1. A life which while not particularly long has been somewhat dense, at least from a subjective perspective. Probably worth noting that this is the case for absolutely everyone, no matter their age : so far they lived not particularly long but somewhat dense lives. Ask around, you'll be surprised. [↩]
2. I appreciate derivatives of this mental construct are, diffuse and nonverbalised, backing the general public's fear of "big corporations", but that doesn't make it any more rational. [↩]
3. Which is something MPEx has for the first time introduced in the BTC finance space, and proudly so. [↩]
4. By raising ~16 billion, because no company undergoes a 100% IPO these days, 5 to 15% is closer to the norm. [↩]
5. So far this year, which consists of about 9 months, MPEx made a little under 10`000 BTC net, which even without considering any growth patterns would make it worth the million BTC. Add into the mix that revenue streams in the purely deflationary BTC are worth lots, lots more than revenue streams in inflationary fiat as well as the fact that MPEx can not lose any BTC and well... [↩]
6. To quote an unknown commenter,

   I don't understand why people rag on mpex. They complain about btc related businesses getting compromised. They complain about bots manipulating the pricing and "fake" walls on mtgox. mpex doesn't have any of that crap and people bitch about it - I don't get it.

   waaah, I want rounded corners and lots of slick js and css...
   waaah, slick-xchange got 0day'd via cornerrounder.js and all the accounts are locked/stolen...

   waaah, people who know nothing about security are creating btc websites and getting hacked...
   waaah, mpex uses proven encryption but gpg is hard and the submit screen is plain...

   waaah, bitcoin should be taken seriously as currency...
   waaah, mpex is charging a fee for signup as if it was a real business but I want to slop 0.05 btc back and forth on options and 30 btc to open account is ridicuous....

   [↩]

7. Depending on your definition of financial institution it might be second after MtGox. Proponents of this theory tend to base themselves on straight comparisons of monthly trade volume, showing that where MPEx does ~100`000 BTC, MtGox does ~1`000`000.

   However, this is only part of the story : whereas MPEx makes ~200 BTC from its exchange trade, it consistently makes 3-5x that out of new account registration, and moreover MPEx results are regularly dwarfed by MPOE results, which is the main revenue generator. MtGox's estimated gross monthly revenue of 3-4`000 BTC stands up some months to S.MPOE's. All this to limit ourselves strictly to financial consideration, completely neglecting the likely more important strategic side of things. [↩]

8. In Romanian, no less! [↩]