How many times did you hear the statement that investing in crypto is a zero-sum game and all of this infrastructure is a big Ponzi scheme? I am guessing that you even cannot count on the fingers of your hand.
Investopedia defines the zero-sum game as a situation in which one person's gain is equivalent to another's loss, so the net change in wealth or benefit is zero.
As such, investor A incurs losses while wealth will be logically transferred to investors B, C, D, etc.
We can therefore deduce that trading is a zero-sum game. A person trades and profits at the expense of another one. However, with this kind of vision, many things come to light if you think about it. It is not only a problem related to the investment world.
Expansion of the Zero-Sum Game Concept
The concept behind this can be expanded to many things surrounding our life.
In sports, whatever the contest, there is a clear winner in most instances. That means that for that team to be victorious, another has to lose.
Both cannot win because It is not how sports are designed—Boxe, football, rugby, tennis, chess, etc. There is only one winner in most cases, so sports matches are the quintessential examples of zero-sum games. Poker is probably the most emblematic one.
Other user cases of the zero-sum game include:
Politics have the goal of obliterating the opponent
Wars have only one country as a winner
Job interviews have only one candidate that takes the workplace.
Businesses fight against each other to have supremacy.
And this could also be applied to the crypto space, where cultism often plays a predominant role. Maxis wants Bitcoin to annihilate all crypto projects, Ethereans want $ETH to be the only platform, and the XRP army wants their currency to be the only payment system.
A Different Perspective
The whole society lives and thrives because of one basic characteristic: progress. Over the centuries, civilization has evolved, hiding that we do not see much that is a zero-sum game.
There were losers in every aspect. However, that was not a result of someone else winning. Society has evolved so much that multiple people can benefit from this enlargement without "hurting" others. The key point is the overall growth in the long term.
Finance Overview
So you might think that trading and investing are zero-sum games as people profit from others' losses. But a bigger view will show that markets often expand as new money pours in, despite events.
This means those who bought strong assets even at higher prices also profited. The "greater fool" concept is a common principle in economics, which states that someone can make money by buying an asset even if they overpay for it.
Another person will always be willing to pay more (the "fool") down the line. In other words, you do not need to buy assets only when undervalued. You can still turn a profit if you find someone ready to pay more than what your asset was worth initially.
Case Study: Apple
Look at a company like Apple that went public on the 12th of December 1980. Were there any cases of losing money? Of course. But for most of its life cycle, investors came out ahead, flashing a not zero-sum investing game.
"How about Apple's supremacy that has destroyed other businesses?" Other companies have come out as "losers" in this plot. Anyways, this has not led society to have the worst communication. We are now more interconnected than 30 years ago.
This is not a zero-sum game. It is an overall growth of a sector/industry. The technology behind phones, computers, and general devices got bigger in the macro scheme. Another example is Google which has transformed how we search for information.
The Crypto Case
Undoubtedly, the cryptocurrency/Web3 space is growing exponentially; for the same reasons explained above, it cannot be allied to a zero-sum game. All of the metrics involved suggest massive and steady growth.
You can see how quickly the world is changing and in which direction. Everything is following the digital way. Think about how cars have changed over the years. They now have full computers integrated onboard.
The travel industry has been reshaping from physical agencies to digital ones. Global payments are now almost fully digital.
And guess what? Despite crypto's small usage and global adoption, the number of transactions is rising.
Do we have issues? Of course, but we're maturing. We are in expansion mode. We are not stagnant. When we look at where things were centuries ago and compare them to today, we can see how this has transformed society. Across the world, standards of living are higher.
This does not mean that every crypto project will see global adoption. There will be many cases where projects and firms will fail across the road, but this will have to be interpreted as part of the growth process. FTX is emblematic. We learn the importance of self-custody.
Final Thoughts
However, the stage is set. We are living in an era of massive technological growth. Our lives will drastically change in every aspect: food, health, gaming, travel, and sports. Technology is infiltrating so hard that we almost do not realize it.
This seems anything but a zero-sum game. The idea of zero-sum stops people from seeing the tremendous potential behind this world. It is like a mental barrier that will be destroyed as it was for the "internet is a fake" believers in the early 2000s.
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