The problem comes when there is no obvious way to evaluate the proper price of an investment commodity. This is not limited to derivatives, but even takes place with simple equities. Look at the attrition (death) rate of high-tech companies which were high-flyers during the dotcom boom. Sure, Apple, eBay and Amazon have flourished, but for each issue which succeeded, how many rah-rah stocks bit thee dust?

Today, there are dozens of AI stocks which have garnered prominence without making a dime. I'm guessing that many will become "redundant" and cause investors heartburn. Don't even get me started on crypto - when anyone can conjure gold from the ether, what makes all "coins" to be equal (unless, of course, all are worth nothing). If the US government wants to corner the market on crypto, but no one else values it, is it really worth anything?

When people start not only betting on outcomes on the above bets, but on the results of those outcomes which have been bundled and securitized, the risks are immense (I think Wendy's metric of 50% is likely way under-stated). To a large extent, the 2008 financial meltdown was caused when the computers storing the names of derivative counterparties were turned off at their demise. What would be the result of a successful cyberattack which mimics that result? Food for thought.

Jeff