Hey Tupperware makes hella money off Tupperware too! Reusing your customers as your sales force, marketing, and distribution channel is hugely profitable.
Forex trading is zero-sum, your expected gain on a trade is zero minus expenses. The average user of forex is moving money from point A to point B and simply trying to minimize their loss. The ones making money in the market are those the other players are paying for the service, and the odd speculator like George Soros who's big enough to exploit market inefficiencies like currency pegs.
"By that definition the USD is a ponzi. No, national currencies too fail to fit the definition, because people do not "invest" in them with the expectation of gain" <-- The 6.6trillion/day forex market begs to differ.
There are a lot of people who are "investing" in Bitcoin right now not out of expectation of real gains, but as a way to maintain assets against an inflating dollar... nominal gains, but not real ones.
Haha, yes if you're just a "weekly" investor. But for me who invested years ago, my assets begs to differ. Back then there were people I know personally that like you who also said that it's a bad idea to invest in crypto, I'm very glad I didn't listen to them haha. Now I just tell them it is not yet too late before global adoption.
Well, insurance industry is a negative sum game (zero sum minus costs of running it) in which all the buyers expect to lose money and all the sellers make it. Still, it's a good idea to buy insurance in some circumstances as utility of money curve is different different for the insurance buyer and insurance company. Such transactions are good for both sides (as they maximize their utility even though the buyer losses in pure money terms).
Now apply that to Forex. There are players who needs to hedge against target currency devaluing and others who are willing to take the risk premium. That you can gamble on it if another matter but then again, you can gamble on many different otherwise useful financial instruments.
Also it is not true that "governments make their currencies slightly inflationary precisely to discourage hoarding." In fact, this is done so that there can be economic expansion. It is true that some economists have advocated for deliberately trying to increase inflation to spur spending, but it turns out that actually forcing inflation is not easy (see also: Japan for the past two decades).
Nobody "invest" in USD. You invest in assets which you expect to appreciate. People investing in Bitcoin do so expecting to control a portion of a finite supply, which defeats its purpose of liquidity.
People absolutely invest in USD, in expectation of appreciation. South Korean banks sell saving accounts denominated in USD as an investment product. Money flows into it when USD appreciates and flows out when it depreciates.
Gross daily trading volumes are a poor gauge of how much capital investors have deployed in a particular market, seeking returns. A single international transaction may induce several forex trades, such as when the sale price of goods is denominated in USD or some other non-local currency. Combine that with the complex, usually leveraged hedging strategies employed by banks and multinational firms, and it’s easy to see whence such a massive figure comes.
I’ve discouraged friends from investing in CC as I could never see a material basis for value, present or future. I wonder what if anything exists that is similar that is not a Ponzi scheme.
Ask yourself this: if you woke up in the morning to find BCs value had zeroed out, how surprised would you be
I would be absolutely shocked if Bitcoin's value ever dropped to zero.
I can't see any conceivable way that happens at this point. Even a coordinated effort by the world's governments to "ban" it (they can't really ban it) would not drive its price to zero... if anything it might even have the inverse effect.
Can you provide any conceivable way this would actually happen? Maybe an asteroid hitting Earth and wiping out all human life on the planet?
2. People panic and sell at whatever price they can get. Let's say Bitcoin drops to $10k.
3. All miners that don't make a profit at $10k shut down.
4. With most miner's shut down, block times go from 10 minutes to 1 hour.
5. The fees to transact Bitcoin go up exponentially as people rush to get out. 10 Bitcoin to make it into a block, sure!
6. The price drops further.
7. More miners stop mining.
8. Block times go up so much that it will take the miners YEARS to reach the difficulty adjustment point that normally hits every 2 weeks.
9. Blocks stop being created, and the price is essentially 0.
With China shutting down a lot of their mining, this is less likely than in May. The higher it goes, the more likely that a sudden shock can destroy it all. Eth has shorter block times and would be able to stabilize better. The block fees going up might actually save the system to keep enough miners mining, but I also think they will scare users away from buying at cheaper prices.
I think some of these are a stretch. I think some of these would definitely happen if the things up to them happened.
I'm with you here, but anytime you have code changes of this magnitude you get political splits and people pushing for more than just fixing the issue to give power to their position.
I have no idea how that would end up, how quickly they could organize, and what would happen in the mean time.
I got in to crypto years ago, I'm still holding a bag of BTCs right now, but not that much anymore, from 100% back then, now down to 20%ish, majority of my assets right now is in altcoins. Why? Aside from the waining market dominance, there is this nagging feeling of fear that it might signifficantly drop in value.
I am little bit paranoid of holding 100% in BTC, the reason for this is because of Satoshi Nakamoto still holding 1 million BTCs. Nobody knows who this guy is, if he's going to spend all his bag, that's a sure fire way of bringing down BTC significantly.
Anyway, I'm still in to BTC, it significantly changed my life. I wish Nakamoto would publicly burn most of what it is in his bag.
The crucial difference that excludes Bitcoin (and any other such blockchain currency) is that a Ponzi scheme deceives investors by pretending it is profitable and the profits are derived from legitimate investments. Bitcoin et al. does not do this; there is no deception, no fraud and, therefore, no Ponzi.
That claim has been and is made about all manner of financial instruments and most of that isn't Ponzi either. To be a Ponzi scheme you need the fraud; "it's safe, legitimate, consistently profitable investment backed by high quality equities with little to no risk, and it's going to the moon!" That's a Ponzi Scheme. Bitcoin doesn't claim to be a low risk AAA investment vehicle.
I think this is simplistic. It’s viewing Bitcoin through a lens of a traditional Ponzi scheme assuming people that trade their fiat currency for Bitcoin are investing, with a view to one day take profits back into dollars.
What if people are seeing discussion of minting a trillion dollar coin, trillions in QE, 25% of all dollars created in the last 12 months…and concluding that fiat currency is in an endgame and they are permanently trading what fiat they have now for one of a finite number of digital assets that will ever be created.
As Michael Saylor once said in an interview: “It’s the superior asset, Laura”
If it's not about cashing out then why is the primary hype mechanism talking about the dollar-equivalent value of anything crypto related? Why does it matter if an NFT was sold for $300k worth of ether?
More and more, I'm hearing only the ETH value rather than dollar denomination. Personally, when I bid (or receive bids) on any of my NFTs, I'm only considering the ETH price.
It's a new shift, but I think quite profound.
Edit: If you're referring to mainstream media, the dollar value is all that most would be able to put into context. For those deep in the space, we're thinking about dollar values less and less. My primary benchmark on overall portfolio value is the value denominated in ETH, not USD.
But ETH is still tied to the dollar and that's where it gets its value, is in the comparison to the dollar. I don't accept ETH for a used car I'm going to sell. I accept dollars, though.
It's not the whole internet, just you or the company that holds your BTC wallet. Just the other day Facebook was down for hours. Imagine had that been Coinbase.
You can denominate ETH in whatever you want, but come April 15th you’d better exchange enough for dollars to meet your dollar denominated tax obligation.
> But ETH is still tied to the dollar and that's where it gets its value,
For people that look at it like that, sure. That's not how everyone looks at it though. I personally look at it with the aim of acquiring as much ETH as possible because I can see that the future economy will be built on it and eventually things will be priced in ETH.
Just because the transitions are slow and you don't see it happening, doesn't mean that there's not a transition happening.
Blame financial news media, things like Fortune magazine's list of new crypto billionaires.
The author of this blog post's claim that 99.99% of people in crypto are only participating because of expectations of future profit is unsourced and a fiction that he has created based on preconceived notions.
Don't participate if you don't want - I like participating in a system that isn't being tracked by agencies especially with news of Treasury actively building out systematic functionality to investigate any bank accounts with transactions exceeding $600
Are you claiming that crypto-finnews was not dominated by the crypto community prior to, say, 2018? The same community that complained at every turn that real media/finance is not taking crypto seriously?
I mean focusing on whether it's a Ponzi scheme in particular vs the entire breadth of reasons to like or not like Bitcoin brings up whether it should attract _more regulation_, the question of free choice to participate or not is moot because it's considered misleading and fraudulent.
I'd bet that cryptocurrencies are much more vigorously tracked than US dollars. The fraction of cryptocurrency transactions related to scams, fraud, money laundering, tax evasion, and other financial crime must be at least a couple orders of magnitude higher than that for real money.
This gets to the heart of the issue with these discussions - people like yourself asserting non-factual statements based on the equally (if not more so) incorrect assertions they hear from others. Where are your sources? Why do you feel like you need to state things as fact when you just don't like something?
You are exactly incorrect.
Cash represents the overwhelming supermajority of laundered funds and ongoing credit extended across criminal elements.
Cash is the heart of the criminal economy, crypto is creating a transparency that doesn't exist in traditional peer to peer physical transaction systems like cash or IOUs.
I'm done with this, nothing productive is coming out of this conversation.
You talk about sources but like where in that pdf does it speak to your claim (cash is the majority of laundered funds) or to the parents separate claim (the percentage of crypto that is used for scams, fraud, etc. is higher than the percentage of cash used for the same). It just talks about _how_ the crime works, not the statistics in question.
I didn't state any facts. I started with "I bet" and included "must be". Those are pretty clear opinion markers.
Your reply is also confused. Is the majority of money laundering denominated in USD and other real currencies? I'd believe it, because that's where the money is. But I'm saying the proportion of Bitcoin transactions that are fincrime-related is surely much higher than that of total USD transactions.
This seems pretty obvious to me given that Bitcoin is much less useful for quotidian transactions, but much more useful to people engaged in assorted financial crime. That's unsurprising given how much cryptocurrency advocates tout privacy/anonymity as features. But if you think otherwise, feel free to show the data that has convinced you otherwise.
Also, it's bad form to read something, go on a rant, and then declare the conversation over. Especially when the rant is incorrect.
> The estimated amount of money laundered globally in one year is 2 - 5% of global GDP, or $800 billion - $2 trillion in current US dollars. Due to the clandestine nature of money-laundering, it is however difficult to estimate the total amount of money that goes through the laundering cycle.
> The United States continues to estimate that domestic financial crime, excluding tax evasion,
generates approximately $300 billion of proceeds for potential laundering, based on the sources
and analysis cited in the 2015 NMLRA. Criminal prosecutions and law enforcement investigations indicate that most of the money earned from crime in the United States stays in the
United States, but also that the United States is an attractive destination for illicit funds generated
abroad.
Stolfi has been around the crypto scene a long time, long enough to have gotten a pretty good idea of what motivates people.
The news media did not create the gold rush mentality around crypto, it has been there almost from the beginning. Go and read the bitcointalk forums for evidence, if you want.
I have been involved in crypto since 2013, I get it. But I have given up engaging in these conversations. You either get the anti-statist thesis and economic liberation angle or you don't. If you don't then OK, best of luck.
I like having spending power that isn't immediately based on CIA organized crime or boomers at the Fed/Treasury
Ethereum already has quantum resistant algorithms ready to go for each part of the system but they perform worse so it doesn't make sense to start using them until quantum computers are more real. There is no long term threat from quantum computing to Ethereum or other systems like it.
I agree with your sentiment, however I wouldn't use Michael Saylor's quotes as strong ground to stand on, he also said BTC can scale to millions of transactions per second which is impossible.
IMO he comes off a grifter who needed to save his company and kept buying loads of BTC to start the "institutions are buying" FOMO.
> he also said BTC can scale to millions of transactions per second which is impossible
He's probably referring to the lightning network, which is theoretically capable of handling millions or even someday billions of bitcoin transactions per second.
More seriously, how many people do you know are seeing what you are talking about?
Everyone I know that invested in crypto did so hoping to trade it back later on for more fiat than they paid. Sure, maybe it's a biased sample, but it's a sizeable sample and I do not know even a single person that traded their fiat for crypto definitly.
English tends to describe things as they are. To me the key principle is the constant use of the words "invest", "investing", or "investment" when it comes to crypto assets.
I don't invest in a credit card for spending. I use a credit card, though.
Thank you. I love the idea of cryptocurrency for its utility… but it seems to me that this idea that crypto is an asset will eventually spectacularly collapse.
Well the idea that stocks must go up is a kind of scheme in itself. The whole financialization of our economy is based on constant growth. So you could argue that it’s a Ponzi scheme as well. Our children will likely be caught holding the bag.
The difference is that both stocks and the general economy produces value. This is what separates them from a Ponzi which is only a redistribution of assets.
"Civilization is a Ponzi" is essentially my conclusion. The thing holding up government backing as the standard of real asset is simply its capacity as the just middleman enforcer. Subtract that and currency, real estate, stocks, bonds, contracts, credit ratings and IP rights all go poof. You're left with clothes-on-your-back and local community trust.
That's why I see crypto tokenization as an important step towards having another "financial material" to work with. It doesn't commandeer enforcement at a global level, so it doesn't compete with governments on their own terms, but it can help build trust at scale by being designed around the trustless scenario, which reduces reliance on enforcement and bureaucratic methodology in many applications. Crypto projects with a focus on achieving good governance are some of the most promising out there, even as they are hidden in the endless waves of scams.
First off, you're hand waving over every person who has ever used bitcoin to purchase anything, which is a lot of people buying a lot of stuff.
When I started mining bitcoin no one was talking about it every have a USD value. It was just silly internet points that you could pass around to friends. I also know a lot of people who hold as a store of value believing that it will easily outlast the US dollar.
Just because all your friends are clowns doesn't mean that those are the only people that exist.
> It’s viewing Bitcoin through a lens of a traditional Ponzi scheme...
And? Should we should look at it through a lens of a non-traditional Ponzi scheme? Ponzi 2.0 is better than Ponzi 1.0?
> What if people are seeing discussion of minting a trillion dollar coin, trillions in QE, 25% of all dollars created in the last 12 months…and concluding that fiat currency is in an endgame and they are permanently trading what fiat they have now for one of a finite number of digital assets that will ever be created.
If the Debt Bubble is nearing its end and fiat currency is in grave jeopardy, what is the mechanism by which the people holding these "digital assets" will save themselves from the economic hell that awaits the world?
It's not finite. The supply of cryptocurrencies is effectively infinite. There's almost no barrier to entry. In the closest historical equivalent, the wildcat banking era, at least you had to have state-chartered bank. [1] But what's it take to launch a cryptocurrency these days? Is it anything beyond a tech guy, a marketing guy, and a a credit card with a little room?
The supply in different cryptos is infinite, but the supply of any particular crypto may or may not be infinite. In the case of bitcoin which was the topic of discussion, it's finite. To say it's not is plainly false. Your (clear) bias is blinding you.
Bitcoin is no longer the only cryptocurrency, and is competing for investor money with all the rest. If all of those were basically unused, I'd say you had a point. But since that's not the case, I stand by my view that "people that trade their fiat currency", as mentioned in the post I'm replying to, are a crucial part of the analysis.
Who cares? Whenever this bull run stalls and crashes, people who don't think this way will sell out thinking the party is over.
Meanwhile, the total number of people who view bitcoin as a permanent allocation in their asset portfolio will have increased drastically, and they'll keep on stacking sats.
Each boom bust cycle operates this way. A minority of new investors become true believers, and the rest of the chaff wash away in the crash.
> One of a finite number of digital assets that will ever be created.
That would have been a plausible explanation, if not for the abundance of digital currencies. There are now many more times crypto assets than there are actual currencies in the world, and new ones seem to be created every day. There is absolutely nothing "finite" about crypto anymore.
> They generally invest in gold as a hedge -- a "store of value" -- that they hope will retain its value in case other assets go sour.
I strongly believe bitcoin will be the new gold one day, if it doesn't pan out as a currency. It sounds insane, but I actually believe the Winklevoss twins when they say Elon and SpaceX will be able to mine gold on asteroids within the next 20 years, which would crash the price of gold. Not to mention as everything inevitably moves digital, we need to have a digital store of value.
> I strongly believe bitcoin will be the new gold one day, if it doesn't pan out as a currency. It sounds insane, but I actually believe the Winklevoss twins when they say Elon and SpaceX will be able to mine gold on asteroids within the next 20 years, which would crash the price of gold. Not to mention as everything inevitably moves digital, we need to have a digital store of value.
What is the energy cost to get a refined kilo of gold back to Earth?
Seems to be trending downward... Who knows if it'll be enough.
I was curious if a similar downward trend existed for solar panels...
"In 1956, solar panels cost roughly $300 per watt. By 1975, that figure had dropped to just over $100 a watt. Today, a solar panel can cost as little as $0.50 a watt."
So, that's a factor of 600 to get to present costs. Gold currently costs $56,500 per kg. So, $33,900,000/kg. So, who knows where we could be in 50-70 years. Plenty of time to switch the entire global economy to Bitcoin, I suppose!
My bank account is a digital store of value, in US dollars. I never visit the bank (was impossible during the lockdown), rarely handle cash, and when I do, it's inconvenient.
Indeed, and I don't keep a lot of money for that reason. It's designed to be a relatively temporary store of value. There's no such thing as a guaranteed permanent store of value, because value is driven by markets.
The value of a bitcoin will always be one bitcoin, just like the value of a dollar will always be one dollar. But you mentioned purchasing power, which can certainly change for both dollars and bitcoins. The "value" of a financial asset, of any practical importance, is its value relative to the value of other things.
Mining gold on asteroids will likely be more expensive than mining on this planet. If mining gold on asteroids crash the price of gold, who would mine gold from asteroids?
On the other hand, if one were to buy proven gold reserves stored on an asteroid, then that might make sense. The exploration company could discount the value of the gold by the existing cost of sending it to Earth and the ongoing cost of guarding it which will necessary given an absence of enforceable property rights. As the cost of terrestrializing shrinks and potential value of off-Earth use grows the value of the asteroid stored gold would increase over time.
It’ll be interesting to see the feasibility based on next month’s launch of Double Asteroid Redirection Test (DART).
DART is a planetary defense-driven test of technologies for preventing an impact of Earth by a hazardous asteroid. DART will be the first demonstration of the kinetic impactor technique to change the motion of an asteroid in space.
The article describes "5 features of a Ponzi scheme" which make it sound like some authoritative rules, but so far as I can tell these were simply made up just for this article. I can't find them referenced anywhere else.
Nope. No one is being deceived. A Ponzi scheme pretends to be based on legitimate equities and value and is therefore a fraud. Bitcoin makes no such claim.
Once the deception is dispelled it ceases to be a Ponzi scheme, the BS spewed by marketers not withstanding. Ponzi is fraud; deception is imperative. Everything is else Not Ponzi.
I'm no crypto currency fanboi, but I feel no need to commit the intellectual fraud of misapplying well understood concepts to denigrate it. Every couple of months, however, someone decides they can score some clicks by yelling 'Ponzi' and we get this headline again.
In addition to being tedious it's also dangerous. Blockchain and cryptocurrency is new phenomena and we don't yet know what value there is here. We can, however, confidently assume that if the false narrative that Bitcoin is a Ponzi Scheme is successfully applied The Great And The Good will suddenly discover the moral obligation to crush it out of existence and criminalize everyone involved.
That possibility worries me far more than whatever part of the status quo bitcoin might disrupt.
Intellectual fraud is somewhat overstating the fact that you disagree with someone else’s definition.
And it puts the blatant “Join the Ponzi scheme early!” stuff I’ve seen on crypto forums into an amusing paradoxical state.
Blockchain and cryptocurrency is over a decade old. Several lifetimes in tech. So far the use appears to be speculation, fraud and burning through electricity as fast as possible.
I hope they do crush it, for that last bit alone if nothing else.
Judging by the attitude on HN, cryptocurrency should be worth $0 and written off years ago. Instead it's bigger than ever and the most important people on earth are focusing on it. Somehow it's simultaneously an incredible, useless scam but is so powerful that we must ban it at all costs!
HN doesn't know everything, do your own research, use your own logic.
Shrug whether or not they've missed the boat or are sanguine on the future of crypto and it's all a house-of-cards filled with hucksters doesn't matter. I just don't see why we need to beat this on the head over and over and over and over again, despite no new news. The anti-greenwashing is the one that really gets my blood boiling because of what a large distraction it is to real climate change issues.
This whole thing is just bringing the level of discourse here down, and I've been on HN for a long time.
"missed the boat" somewhat implies that blockchain technology is already being used for anything except the backing for pump-and-dump schemes and the punchline for jokes.
Unless you mean specifically "missed the opportunity to make lots of money", in which case sure, that's absolutely accurate, but if I wanted to gamble I'd just go to a casino.
It's funny how people on HN which are likely some of the first people in the world to know about bitcoin (eg. since it was only at $100 or less) keep upvoting articles like this for years now.
I think these people deep down know that they missed an amazing chance by not investing in bitcoin (and other cryptocurrencies) years ago, so articles like this make them feel better about it and lets them justify not investing in bitcoin to themselves.
But then in a few years bitcoin 5xs again and then they realize if they bought it at todays price would still have made them massive profit.
But then they see a new article saying bitcoin is a ponzi and upvote it and feel good about themselves again.
Oh but they have to downvote any comments like yours too.
I was just now seeing the first video of https://a16z.com/crypto-startup-school/ . Whole video is about how blockchain is awesome because Computer, Internet and Mobile were awesome. Followed by some answers about how we don't know of any use case right now.
DeFi (Beyond a currency, a whole trustless financial system where no one can cheat)
NFTs (Not just art but concert tickets like GET protocol, gaming like Axie Infinity, collectibles like Crypto Punks, etc)
DAOs (Internet scale corporations/governments)
Identity systems (ENS, BrightID, Proof of Humanity, etc which allow for supranational products that build on top of reputation and uniqueness. The Sign-In With Ethereum standard is bringing self-custody OAuth authentication to Web 2.0 applications)
Enterprise interoperability (Baseline)
There's a ton of stuff going on and it's almost impossible for any one person to keep up with everything. It's easy to write everything off as a scam but there's hundreds of thousands of really smart and high integrity developers working in this space and it's worth keeping an eye on.
Yes, when you need certainty that data hasn't been tempered with. Logistics, being able to trace back where a certain item came from. How about trading cards, be certain that the trading card you are possessing is the only one and it is genuine. (NFTs)
Why specify non-currency? Doesn't Bitcoin provide a more convenient/less expensive way to send money between countries (or both). Those are pretty powerful uses. (I don't know money laundering and drug dealing are still more convenient in Bitcoin)
A bitcoin transaction and a bank transaction are very different things.
A bitcoin transaction is settled as soon as the block is mined. Without any third parties or trust involved, and no way to reverse the transaction. While a bank transaction could settle in days and always with some trusted third party.
Try making a transaction over the lightning network (layer 2 tech of bitcoin), it’s instantly settled and almost for free. The whole country of El Salvador is making transactions within the country using this technology and they’re getting remittance from outside the country far cheaper than banks.
It boggles my mind that people genuinely believe this is a good thing, especially in an ecosystem so rife with scammers.
I get that it's rather integral to the primary use cases of bitcoin, but that doesn't mean you have to pretend it's a good thing when marketing the currency to the average joe as a PayPal replacement.
How’s it bad? You have to accept responsibility when making transactions. This is tremendously beneficial for businesses and end users when making peer to peer transactions.
Because there's absolutely no protection against fraud. This is somewhat of a problem when there's such a gigantic amount of fraud going on.
> You have to accept responsibility when making transactions
Yes, and so does the other party.
What irreversible transactions do is give the receiving party the ability to shirk all responsibilities, because it's significantly more difficult (if not impossible) to hold them to account.
Urbit for starters (which technically you could say isn't NOT about money, since entities are de facto tradeable. But the main purpose for identity being on the Blockchain is reliability and decentralization, with the inherent benefit of them being in effect utilitarian NFT's). I use it every day, and it's one of the technologies I'm most excited about seeing evolve in the future. I'm not trying to evangelize or proselytize Urbit--just being frank.
There's also interesting things going on in the NFT space towards MMORPGs based around an economy of in game items being themselves NFT's. It's not all stuff and nonsense and jpeg millionaires lol :)
Some of it is, surely, but as time goes on more and more technologies will use it to greater effect with more utility beyond merely, "prices go up".
No, it’s not possible. All mining, for probably the past 4 or 5 years, is done on ASICs, typically in places selected for favorable energy or climate reasons.
Bitcoin? No. Not even a little bit. Bitcoin mining has been dominated by ASICs since 2012 or so. Some other cryptocurrencies can still be mined on GPUs, but the profit margins are rather narrow.
You can still mine ETH on a (high-end) GPU and make a profit. BTC mining is way too advanced for that, it's done with mining-specific chips. Mining with a GPU gives you too little hash rate for it to be profitable.
Going a bit more in-depth: Mining is a competitive activity. Your chance of being the person to mine a block is proportional to the fraction of the hash rate of all miners you hold. Therefore, if everyone is using super advanced mining hardware and you go in with a GPU, you hold an insignificant fraction of the hash rate and have next to no chance of actually mining a block, while you still spend on power and hardware maintenance - which will probably make mining a net negative for you.
Nowadays BTC mining is advanced enough that the only way to make a profit is with big specially-designed rigs located in places with access to very cheap energy sources.
Bitcoin isn’t exciting because it doesn’t solve very many problems relative to the massive energy expenditure needed to create it. It’s like a fire at an oil well or a gas pipeline break. The arguments for why we should use it remind me a lot of arguments for why this year is the year of the Linux desktop. Bitcoin may be eating a lot of speculation but I can’t buy beans with it.
it's as old as android with like 5 orders of magnitude less societal impact and worse societal impact when there is societal impact than android. it's eaten a material amount of all gains in renewable energy basically using cycles to heat the world for what ends up being an O(n) database insert.
I did do the reading. It's an O(n) db insert. The blockchain's the DB and the insert needs PoW.
throughput of a blockchain is contingent upon tweaking but for the original bitcoin, still used, it's 6 mb/hour. electricity consumption is 14 gigawatts. if i were given 14 gigawatts of electricity i think i could do better than 6 megabytes/hour.
Do you understand the tradeoffs of why it works that way?
That for an open and fully accessible, decentralised system that exists in an adversarial environment there has to be a large cost to any attacks?
Of course there are much more efficient ways to store data, but those are centralised and vulnerable to the problems of centralisation. The blockchain's and proof-of-work's purpose is to be decentralised.
Someone was telling me that the general problem with HN is that they're all very technically capable, so they look at Bitcoin, understand it from a technical perspective (not always true) and deem it as inferior to other technical solutions, like a centralised database.
The bit that's lacking is an understanding of money, and what makes certain types of money sound or unsound. It's easy to overlook the problems of fiat money because its all we've ever known.
What was it about gold that made it the dominant form of money for literally thousands of years? Why was it abandoned? How does Bitcoin solve the problems of gold and fiat?
Vijay Boyapati (ex-Google engineer) does a pretty good job of outlining this in his article.
"By that definition, stocks too are ponzis. No. Stocks have an external source of revenue, namely the profit that the company makes by selling its products and services to customers..."
This is a very simplistic view of equities markets and does not explain penny stocks, meme stocks (GME/AMC), TSLA, and other things that seem to escape traditional fundamental analyses.
The average P/E ratio of U.S. stocks is 38, meaning if the value of a stock really is primarily based on its ability to produce an external source of revenue, it would take 38 years for an investor to recoup the cost of a share of a company. When you adjust for 2% inflation, it would take 117 years for someone to recoup the cost.
Since that exceeds the lifespan of well over 99% of the population, it must follow that people are not investing in stocks because they expect the company to produce some external source of revenue that will eventually repay the principle. There are a host of complex reasons why people invest including wealth preservation, a desire to support a company they are interested in, speculation, a belief that investing is smart and the right thing to do... these are all fine reasons, but they have little to do with some kind of fundamental valuation that some people think stocks intrinsically have.
The vast majority of gains from the stock market have next to nothing to do with external sources of revenue.
What other ways could you benefit? Imagine that you had no expectation of selling your share for a higher price in the future, then what other way is there to benefit?
You have a shareholder vote, okay but the percentage of shareholders who actually vote is roughly 9%. The only people doing the voting are large institutions, not individuals:
Dividends have no net effect on how much you earn from a share. If a stock is currently priced at X and then pays out a dividend of Y, the price of the stock decreases by Y so that there is no overall effect on the value.
The reason for this can be understood in many different ways, but one way I like to look at it is if paying a dividend had no effect on the price of a stock, then one could in principle buy a share of the stock at a price of X just before the dividend is paid and then sell the stock at a price of X just after the dividend is paid just as you describe, effectively pocketing the dividend and earning an almost risk free return.
Of course in practice we know that on average the price of a stock drops by the exact amount of the dividend paid, and hence collecting a dividend has no overall effect on the value of a stock.
It is exactly what you described and my explanation focuses on a specific scenario to make it very clear why your reasoning is flawed. You can't just assert that it's possible to sell a stock in the future for the same price that you bought it for and that will magically come true, you have to observe what actually happens in reality and whether reality is consistent with your beliefs.
To better familiarize yourself with the literature, perhaps you can start with this seminal paper produced by the Federal Reserve:
It looks at both the short term and long term impact of dividends and shows precisely that the marginal price of a stock drops by the amount of the dividend, meaning your premise that you can simply just sell the stock at a future date for the same price you bought it for is just not supported by the facts.
Whether you hold the stock and collect multiple dividends for 10 years or 10 days, the fundamental principle is the same: a stock with a marginal price of X that pays a dividend of Y will on average decrease in price by Y. Dividends produce no change in the overall net value of a portfolio, all a dividend does is convert one form of value into another, but no increase in value is ever produced.
Please provide an example of a stock that has a price that behaves the way you’ve described. That paper is talking specifically about ex-dividend dates, not long term behavior.
I’ve actually held ibm stock for years, and it has paid dividends and stayed above my initial purchase price nearly the whole time. That seems to fly in the face of your claims.
> if the value of a stock really is primarily based on its ability to produce an external source of revenue, it would take 38 years for an investor to recoup the cost of a share of a company
Since a minority of stocks return a dividend, then the holder of said stock likely never sees a cent of company earnings. Time duration to recoup cost of stock by P/E is NaN.
The vast majority of gains from the stock market have to do with inability to invest in new ideas (on both supply and demand side).
It doesn't explain which horse wins in the 4th race at Churchill Downs, either. Major financial markets do attract scams and gambling-like behavior the same way picnics attract flies. The reputable exchanges work to shut that a lot of that out, of course, because it's bad business.
Tesla unfortunately undermines your argument. Has it been hyped to the moon? Definitely. Is there a good chance people will lose a lot of money on it? That too. But they make actual cars that get actual people actual places. That is the kind of actual value creation that underlies most stocks.
A lot of the "Common Objections" relate to the REASONS people choose to own Bitcoin and how those cases make it a Ponzi.
There are many different reasons to own Bitcoin, however the author seems to only view it through the lens of someone living in a wealthy and developed country with financial stability.
The properties of it being difficult/impossible to confiscate and its privacy make it valuable in oppressive regimes. A refugee could store their wealth in Bitcoin, leave their country, settle somewhere else, and access their Bitcoin without the risk of it being confiscated during the journey, because they can simply memorise the seed phrase (24 words).
It's predictable issuance schedule also makes it valuable in countries suffering from high inflation or hyper-inflation.
Alex Gladstein works for the Human Rights Foundation and does lots of good work in Bitcoin advocacy. His other articles are worth checking out.
And the data backs this up. Some of the biggest growth in Bitcoin users around the world have been in places around Africa and Vietnam who are subject to some of the situations mentioned above.
Do you think these people see Bitcoin as a "Ponzi"? Do you think they care if such a definition doesn't change the properties they find useful/valuable?
Generally people participating in a Ponzi scheme do not view it as such. The tactics deployed by truly oppressive regimes make anything easy to confiscate including bitcoin.
well you had to have something of value that you had to trade for bitcoin. Also in oppressive regimes the act of attempting to leave the country already makes you a suspect.
They aren't going to immediately execute everyone who is crossing the border. Even in authoritarian regimes, some people may be able to leave, and borders are not completely shutdown.
And in that situation, for those people, it is useful to be able to carry money, in a way where they do not know that you have it.
I mean sure, some people make it out of North Korea. A lot are publicly executed to be made an example of too.
I think you fail to understand the power of a true authoritarian government, particularly if they can monitor and limit your access to the outside world.
* Use a VPN, you're guilty of Treason.
* Use a currency other than the North Korean won, you're guilty of treason.
* Use an electronic device other than state sponsored devices, you're guilty of treason.
All executions will be recorded for posterity and broadcast to the people as a reminder of the power of the state.
True, sufficiently oppressive regimes can confiscate bitcoin in a lot of situations.
However, as soon as they start doing that to the first few people, what's going to stop everyone else from instantly sending their bitcoin to family and friends across the border for safe keeping?
So you or you child is being tortured but you are "happy" that your bitcoins are safe ? This whole thing omits the question of how a person under oppressive regime came into possession of bitcoin in the first place
With wealth like gold, land, oil, or any other physical resources, an oppressive regime can just kill all dissenters and take control of everything. The payoff to violence is huge.
But with a digital wealth like bitcoin, which can flee the country at the speed of light, even if the owners can't go with it, the payoff to violence evaporates. The oppressive regime that spends a lot of time and energy torturing and killing people will have no spoils to show for it.
The only wealth people could offer for Bitcoin is wealth in a country with an oppressive regime. Who internationally can even take possession of that to cover their expenses?
The only plausible option would be to actually just setup a mining rig and mine the Bitcoin, since presumably for a while their might be an electricity grid their and the BTC network ascribes value to that activity...except you can't mine on commodity hardware to anymore either.
I find it very manipulative to offhandedly dismiss the utility it provides to people suffering under oppression or unstable financial systems and to compare that to smoking.
As the article states, check your financial privilege.
And "tiny amount of people"? What's "tiny" here? Hundreds, thousands, millions? Do you know how many people use Bitcoin in this way?
It's very hard to get exact numbers of users, because of how Bitcoin works, but this should give you a good sense of proportions and you could infer numbers of people based on known population sizes for each country
That link plays fast and loose with stats making any actual analysis impossible.
"We calculate the metric by estimating total cryptocurrency received by that country, and weighting the on-chain value based on PPP per capita"
Weigh how?
"we rank countries by their P2P trade volume and weight it to favor countries with lower PPP per capita and fewer internet users"
Weigh how? How do you get the numbers on internet users?
"We rank all 154 countries according to each of those three metrics, take the geometric mean of each country’s ranking in all three, and then normalize that final number on a scale of 0 to 1"
What?
It's not a methodology conductive to analysis. Is a hodge-podge of smart sounding words that create pretty graphs.
Oh, and they changed the methodology this year, but still compare results to previous years that used the old methodology. Very scientific
Bitcoin is merely a technology. Calling it a Ponzi is the same as calling the Internet a Ponzi. They are merely tools. How one uses ultimately determines the coarse.
I got involved in bitcoin after being blackballed from the (US) financial world while for 2-3 months while I was "investigated" in the most dystopianly opaque way possible. One day I lost the ability to transact. A few months later I got it back. Had it not been for good friends who could cover my expenses, I could have easily ended up homeless. And the most shocking part of it all, was that I was merely collateral damage -- I had done nothing to piss off any of the powers to be.
It made me quickly appreciate that a persons ability to transact while not quite a human right, isn't too far from it either. There is no way the government (or financial world) should hold the power to wreck someone with no accountability. Bitcoin as I see it, is a way to shift the balance of power somewhere closer to where it belongs.
I don't hold bitcoin because I think it'll go up in value, I hold it because I don't want someone to tell me I can't pay rent because ... well they can't tell me why, because "sorry, I don't have access to that information"
No, not at all. During my asset freeze, I considered trying to take action against my bank to force something to actually happen and facts to come to light. But I also had access to no money, and and my time was better spent working some cash jobs so I didn't have to lean so much on my friends. And then once my assets were unfrozen, I don't think I really have much grounds for recourse..
I’m sorry but what? Was this in the US? Because the intro was “oppressive regime,” and then you gave an example of an oppressive regime, and now I’m realizing you might very well be in the US.
I’m just shocked; never considered this could happen. Was this related to your employer, and… Well, I should just ask rather than guess :) thank you for sharing, and I’m really sorry that happened.
One of the best decisions I’ve made recently is to set up a company for myself. More specifically, I set up a non profit “for the world” (mostly as an intellectual exercise of “how hard would it be to mimic what openai originally set out to do? Turns out, it’s not hard!) which then put me in a position where I knew exactly how to set up an LLC for myself for consulting, and how to set up a bank account (use https://www.mercury.com — don’t use anything else).
The takeaway is that, if you’re in the US, you can have protection from exactly this sort of thing, for roughly zero cost — in Missouri the filing fee for an LLC was a whopping $50. That’s how much it cost me to set everything up, start to finish.
I now have a business banking account, quickbooks takes care of the taxes (admittedly $24/mo isn’t “totally free” but it’s also “pretty cheap” relatively speaking) — which means that yes, someone could freeze my LLC (hello IRS) or freeze my personal account (hello US Bank, you suck) but it’s highly unlikely both will ever be frozen simultaneously, unless both the business and my personal accounts are under scrutiny simultaneously.
The cure for that is very simple, as long as you’re rigorous: income comes in to your Mercury account; it flows out into your personal account, by paying yourself a salary. Never use the Mercury account for anything else. Congratulations, your LLC is almost impervious from problems. (My famous last words; the fact is, I have no idea what I’m talking about, and this is what I’m expecting to be true as t approaches infinity).
So yes. Bitcoin: good solution. LLC: also good solution. Wish I’d taken advantage of it sooner.
Unsure about outside of the US though, sadly. Though I’ve often toyed with the idea of making a company specializing in setting up one of those offshore bank tax havens, and offering a product like Stripe whose sole purpose is to automate that. :) Then everybody gets the loophole, rather than a rich few.
Anyway, thanks again for sharing that very unexpected story; I hope it never happens to you again!
Yeah, it was the US. Funnily enough, I never found out why it happened. Everyone claimed to not know, have no access to it, and the people who were supposed to be in touch with me never were. A week earlier I did send a reasonable amount of money to someone in country that is most well known for it's illegal drug industry. Although I have nothing to do with drugs or anything illegal, and no way of knowing if that was even related or not (no one even asked me about it, so hard to tell if it was a coincidence or not)
That’s sadly the catch. I’m sorry — I completely forgot to mention that this works for me because I’m consulting, so businesses pay my LLC rather than me.
However, I will say that one business wanted to hire me full time, and I refused and asked for a higher consulting rate, which they agreed to. So it’s not impossible for your next job to end up similarly.
But then you don’t get benefits (my wife’s health insurance covers us both), sick days, and you probably have to log hours (to my surprise). So even if it’s more lucrative for me right now, there are definite reasons this path isn’t suitable for everyone.
Definitely consider it if you can swing it though. And also, you can simply invoice yourself for services rendered from your LLC, which effectively transfers money from your personal account to the LLC. I’ve had to do this to bootstrap funds into the account (since your balance starts with $0, which is useless).
The problem is tax. There are two issues. One is that an LLC is a pass-through entity. That means all profits are expected to pass through immediately to your personal account, or used immediately on business expenses. If you try to maintain a $20k balance for a year, for example, you’ll discover that this balance counts against your deductions for that tax year (effectively a negative $20k deduction). Or at least that’s my understanding so far.
Therefore, as with most things, you should ask an accountant for advice. But that’s an unsatisfying answer. My answer was going to be, therefore, you can create a C Corp instead of an LLC, and transfer some of your personal funds into that (by invoicing yourself).
The problem (argh, they never end) is that the income will be taxed for the Corp, and then taxed again when you pay from the Corp back to yourself. This is precisely the “double taxation” problem that LLCs were designed to solve!
The reason it still might make sense is because of all the incredible benefits of setting up your own company. For example, merely opening a Mercury account at all means you can redeem $5k of aws credits. $5k! I’ve done this! To my surprise, it happened!
And that’s just one of like 80 Mercury perks. There are so many, and it’s been so much fun window shopping through them all. It’s how I wound up using quickbooks for example.
Plus you’ll have an account that people can wire money to. Mercury has a nice little PDF with all your wire transfer details. It feels like driving a Tesla, whereas US Bank was like not having a car at all. (It was truly one of the worst business banking experiences imaginable. They even managed to lose an incoming $10k wire transfer. Nonsense like that simply doesn’t happen with Mercury.)
So there’s a brain dump of pretty much everything I’ve learned over two months of studying this. The takeaway is that if I had a day job, I would set up a C Corp and transfer a few grand to it by invoicing myself. (No, I wouldn’t use stripe atlas. That’s $500. You can do it yourself for $50, and it’s been surprisingly painless. Both Missouri filing and the IRS EIN were entirely online, so you don’t even have to mail anything.)
Just, uh… perhaps consider it a side hobby. This kind of nerdiness is uniquely fun to me. I imagine that it’s incredibly un-fun for most people. Treating it as a hobby helps overcome that pain, and the risk turns out to be minimal. I was surprised by that.
> . If you try to maintain a $20k balance for a year, for example, you’ll discover that this balance counts against your deductions for that tax year (effectively a negative $20k deduction). Or at least that’s my understanding so far.
You don’t get taxed on having a balance; you do get taxed on the income that generated it. (Or am I missing something crazy?)
In one of these links, I am quite certain I saw words to the effect of "if you maintain a balance in the business, then the following tax year, it will count as a negative deduction for the shareholders (i.e. you), because the business type is a pass-through entity, and pass-through entities are expected to pass all of their income through to the shareholders."
The fact is, I don't know whether it was an LLC or a sole proprietorship, and I'm now second guessing what I thought I knew. Because yes, it does sound pretty ridiculous that an LLC needs to maintain a $0 balance or else it will penalize the owners of said LLC. That doesn't sound right.
And yet, words to that effect were located in one of these links. (Hunting for it now.)
EDIT: Welp. Can't find it anywhere. At least I admitted from the outset that "ask your accountant, do not trust me" is reasonable advice for anyone thinking of taking business advice from random HN comments.
I'll downshift to "I don't know whether it's a bad thing to maintain a long term balance in an LLC, but I'll be finding out the answer before the end of this tax year."
If there's no disadvantage to keeping a balance in an LLC, then I revert to "Just form an LLC for yourself; it costs $50 to do so. And you can keep as much money in it as you want, as long as you don't mind paying income tax simply for transferring money into your LLC."
It's possible I was thinking of a negative tax basis for an S corporation, if the S corporation has a long term account balance. But a tax basis is certainly not the same thing as a tax deduction, so I throw my hands up in the air and say "I'll be using a portion of my consulting income to clarify these questions with both an accountant and a lawyer; all advice should be considered suspect."
> Because yes, it does sound pretty ridiculous that an LLC needs to maintain a $0 balance or else it will penalize the owners of said LLC. That doesn't sound right.
It's definitely not correct at all. Neither is issuing phantom invoices to yourself to put money into the account.
A bank account is just a vehicle to store business cash, it really has nothing directly to do with the way you should be maintaining your LLC's books. You should be recording things like that as "capital contributions" which increase your "capital account."
Similarly, profits and losses should be booked to your capital account. I would strongly recommend doing some reading on capital account bookkeeping.
Excellent -- thank you very much for the corrections. I was wondering precisely that, when I was initially funding my Mercury account.
I may have given the wrong impression, but to be clear I certainly wasn't recommending using Mercury as your tax accounting software! I was saying that as long as income flows into your LLC's bank account, and out into your personal account, and that you never use your business account for personal expenses, then you have nothing to worry about.
I really appreciate the reference on capital accounts; not knowing how to classify inbound transfers from my personal account was bothering me. That still raises the question of whether there is a tax, and how much the tax is. Are you saying there's no income tax when you transfer your personal funds into an LLC, since capital contributions aren't income?
> If you plan to contribute property, you will need to obtain a market valuation to determine the value of the property you are contributing to the LLC. Capital contributions in the form of property may also attract a number of potential tax consequences, so it's generally a good idea to consult with a tax advisor beforehand.
> You also can make a capital contribution in the form of services. As with property, you will need to obtain a market value for the value of your services. There also are tax consequences, as you will have to treat this value as if it were actual income you earned for your services, meaning you will have to pay personal income taxes on the value of these services. Because of this, services are not as popular a form of capital contribution.
So, yes, you can "invoice for services rendered" (aka services capital contribution, apparently) but it'll be taxed as income. Therefore, you want to contribute property, and the tax consequences are left as an exercise to the reader.
Looks like I'll be completing that exercise, but perhaps not at 2:30am.
> The capital contribution increases the owner or partner's equity interest in the entity. Capital contributions are not considered business income unless given in the form of a loan.
> For a Single Member LLC (that has not made an election to be taxed as a corporation), the IRS does not recognize the LLC exists (for most purposes). Therefore, you and the LLC are the same. Therefore, there really isn't such thing a Capital Contribution for tax purposes.
Apparently "It's complicated(TM)" is still the final answer, because single member LLCs can't have Capital Contributions. Hmm.
One reason I post openly about this sort of thing is precisely because people like yourself come out and correct my misunderstandings. So again, thank you! This is certainly a reminder that I have lots more reading to do.
If you want to protect your money, wouldn't it be easier to open an account in another country and transfer the money there? In Europe we can do it very simple with Revolut or Monese.
When you have money in the Revolut account you can spend them in any country and it would be very difficult for some entity to block your funds.
That's a good point! I don't know anything about that. I assumed it was difficult for a US resident to open a long term bank account in Europe without having to reside in Europe. But that assumption is probably wrong.
Thanks for the hint about Revolut and Monese. Now I'm curious what their requirements are...
I personally know others that have experienced this I have had to help out. Another who simply lost all their identity documentation in a fire and was locked out of their accounts. Similar stories with many homeless people I used to worn with.
It made me realize how fragile our access to bank accounts and identity actually are.
I have as such setup a portion of my wealth in crypto-assets with a dead mans switch and recovery methods covering fire, amnesia, identity loss, or death, while ensuring the majority can't be seized by a government or rubber hose attack without the consent of myself and a quorum of people I trust around the world confident I am not under duress. As long as I have the freedom to communicate and some time I can recover.
The market value of crypto-assets may not be predictable, but I prefer to be able to count on never losing access to it, and having theft protections no bank can offer.
Wouldn't that only work if you had places (like your landlord) taking Bitcoin off the blockchain directly for payment? Otherwise, transacting still requires the cooperation of intermediaries subject to sanctions. Maybe you can launder through a friend, but... it doesn't seem any easier.
It's massively easier. If at the time I had my money in bitcoin, I would just need to find willing trader (someone who would trade my bitcoin for making my rent payment). But because I didn't, and my bank account was frozen, I had to find someone to pay my rent _on credit_. I was lucky to have someone to turn to, I suspect not everyone is fortunate to have friends who are willing and able to help and trust someone with a frozen bank account.
And what also is scary, if I had been a real target and not bycatch, I bet anyone who helped me would've also faced the same asset freeze for helping me.
I tried out localbitcoin a bit before the pandemic. Absolute shit show. Nobody wanted to actually trade. Seemed like most participants were phishing for personal information, probably for identity theft.
> I don't hold bitcoin because I think it'll go up in value, I hold it because I don't want someone to tell me I can't pay rent because ... well they can't tell me why, because "sorry, I don't have access to that information"
Well you certainly can't do that with Bitcoin unless your landlord has a similarly anarchocapitalist worldview. You'd have to cash it out at an exchange and pay the individual in question. This choke point would leave you similarly locked out.
This applies to only a fringe minority of the participants in the Ponzi.
More sympathetically, even if this was a real problem that doesn't mean a Ponzi scheme is the way out. It's like saying you got burned in 2001 so decided to invest with Madoff knowing full well he was a Ponzi, but at least he wasn't a tech company.
You'd have to cash it out at an exchange and pay the individual in question. This choke point would leave you similarly locked out.
Would it? The parent commenter was in the United States, and even in cities of about 1 million people, I've seen Bitcoin ATMs at chain supermarkets. Some were even integrated into the ubiquitous CoinStar machines at the front of the store.
To begin with, let me say I'm very sorry this happened to you, and I think it sounds like an example of a really broken system. This should never happen to someone randomly, and I think you should have been compensated a lot for the troubles and stress it must have caused you.
However, I think we should be careful with drawing the conclusion that technology for circumventing our institutions' ability to regulate altogether is the natural solution, when perhaps fixing the institutions would lead to an overall better outcome. If we all moved to Bitcoin, then we would no longer have central democratic control over who is allowed to transact or not, and I don't think that leads to a better society.
An open exchange is progressive. A verified list of people who can transact is a closed stockmarket. Democratic imples a direct vote which is very far from true.
The institutions ought to be under democratic control in the sense that they are regulated by elected representatives. If they are not, then that is a big problem which should be fixed rather than circumventing the institutions altogether.
Physical cash is de facto restricted in many places in the form of upper bounds on the amounts that one can withdraw and deposit.
"Bitcoin privacy" is a contradiction in terms, as has been repeatedly proven.
You set up a scene of a refugee "storing their wealth in Bitcoin", but it begs the question: where are these refugees with substantial wealth they are looking to exfiltrate? Typical refugees are emigrating from locales where they were earning dollars per day. The use case of shielding hoarded wealth during a journey to a freer locale is a blinkered fantasy. (Of course, if this is incorrect, surely there are hundreds, at least dozens of compelling case studies by now?)
Perfect example, thank you. Given the typical wage in Venezuela of late, someone looking to exfiltrate their "wealth" there would be looking at working weeks if not months to afford a single typical BTC transaction fee.
Again, these proposed use cases are absolute fantasies.
One way people have of affording these fees is by working for people outside the country who can pay a salary that would cover the fees alongside being a living wage. After building enough wealth in crypto, they can choose to leave the regime in better terms than as a refugee. This has happened many many times already, this is the most valuable use case for crypto in practice.
i don't think you know what the typical wage in venezuela is. i do because i live here. you can watch this video if you want to know (it's not 3$ a month): https://www.youtube.com/watch?v=br7aSAXcPW4
say i've happened to save 1000$ and i want to leave the country and i don't want the police near the airport to take my money as they're known to do. do you think it would be an absolute fantasy for me to find some way to sell my 1000$ for bitcoin and buy them again somewhere else?
this is not an accurate portrayal of refugees. i can’t be bothered to look for a source atm, but the first wave of refugees out of syria that caused a panic in Europe were not poor, unskilled laborers - they were middle and upper class families who could afford plane tickets. It costs many thousands of dollars to cross borders illegally by the way, so you’re likely to exhaust your savings trying to escape whatever you’re running from.
I wrote "'typical' refugees". No doubt monied folks need to migrate under duress as well, but they are absolutely a vanishing minority of worldwide refugee flows.
> It costs many thousands of dollars to cross borders illegally by the way, so you’re likely to exhaust your savings trying to escape whatever you’re running from.
...and worse, often end up in debt along the way. Where is the room in that common situation for the need for exfiltrating funds via BTC?
I didn’t mean to suggest BTC was useful along the way, just had a kneejerk when I read the comment about penniless refugees. but by the time people are congregating in border camps i’m sure you’re right, the majority have less pennies than they’d like.
>>>but it begs the question: where are these refugees with substantial wealth they are looking to exfiltrate? Typical refugees are emigrating from locales where they were earning dollars per day. The use case of shielding hoarded wealth during a journey to a freer locale is a blinkered fantasy.
African migrants trying to cross the US southern border, on the low end. Airfare from West Africa isn't cheap. In this article[1], one migrant says the trip had cost her $5,000. It takes some assets to pull that off, and some of that is probably kept on their person for the duration of the journey. A microSD card in a condom in a....sensitive location....is not likely to be detected if/when narco-smuggler cartels shake you down for cash.
At the high end....government kleptocrats fleeing Afghanistan. Supposedly President Ashraf Ghani and his family had to leave piles of cash because they couldn't carry it all when he boarded a helicopter.[2] Too bad they didn't convert to stablecoins and store them on a wallet on a thumb drive.
if it came down to that, depending on time, i think i would prefer to stitch 256 bit patterns into various articles of clothing before i stick any memory cards anywhere
I loathe Bitcoin, but that’s vastly wrong. As one counter-example, the Syrian civil war didn’t only displace poor people who never had anything to begin with; it displaced a lot of middle class families, made of engineers and doctors and such, who did have assets to their name but that were almost certainly incapable of taking it out of the country with them.
It remains to be seen whether it would have been practical to move money from Syrian liras to Bitcoin. No one wants to buy hyper-inflating currency.
It is unfortunately quite factual that the vast majority of refugees worldwide functionally have no assets and often end up in debt at the end of their journey from home. Anecdotes of relative handfuls of affluent migrants are hardly compelling vis a vis the utility of e.g. BTC, especially given the lofty claims being made.
Outside of whether it would be feasible to move wealth to bitcoin before fleeing, discounting the existence of people who weren't miserable before they had to flee their decent existence due to war is insulting. You insinuated that all people who flee their country were resourceless before their displacement. Confronted with the fact that they aren't, you thought to save your point by declaring them "anecdotal". Not classy.
I didn't discount anyone's existence, or make any insinuation about "all people" of any description. The claim upthread was that BTC is useful when exfiltrating wealth when emigrating; for that to be a compelling and common use case for BTC, said wealth would need to be common. My pointing out trivially verifiable facts re: the typical (a.k.a. statistically predominant) financial disposition of refugees might not put that claim in a good light, but it's not pejorative or dismissive whatsoever of anyone or their experiences.
IMO, the not-classy thing is cryptocurrency advocates constantly trying to leverage the plight of refugees, the unbanked, and those living in locales with constrained economic freedom to underwrite the reputation of a set of technologies that are overwhelmingly used as pernicious speculative vehicles.
The fees for Bitcoin are way too high to make sense for citizens in poor authoritarian counties.
The average transaction fee during slow periods is about $5 and it jumps to $20 whenever there is load on the network.
And the lightning network is a poor solution to this because the LN requires a lot of capital to fund channels, something poor people explicitly don't have.
Finally, the fact that Bitcoin proponents have to point to poor authoritarian countries to find legitimate usecases is telling in and of itself. It's basically a blunt admission that the technology is mostly useless in the US.
I'm sorry if I appear a bit dense, but this is the part of bitcoin I least understand. On an individual level, when transferring person to person, are the transactions ever more complex than just remove funds from here and add it to another wallet?
No it's not real, the cost to do a simple transfer up until yesterday has been in the ballpark of 0.1-0.15. This very moment it's around $1. You can see the current estimated cost here: https://mempool.space
In addition to that, there's always the Lightning Network as well wherein you can transact for fractions of pennies.
The lightning network only allows you to transact if you fund a channel first, which requires an on-chain Bitcoin transaction to create and eventually one to close, thus incurring transaction costs twice.
You should fund a LN channel for more than one transaction because you cannot change the channel funds after creation, so you better make sure enough is in it. This makes it unsuitable for things that require more than a tiny fraction of your monthly income, e.g. rent.
LN channels also need to be constantly monitored to not get scammed, which the LN whitepaper suggests you to pay third parties for.
The LN whitepaper completely obmits the routing problem, too. It more or less says "we don't want to think about that now". A network whitepaper that doesn't think about routing, imagine that.
What? You can download a lightning wallet right now and I can send you sats without you having to fund anything or even provide any personal information.
Yes, that makes it a closed system, but it was never realistic to have every single person on earth access bitcoin via on-chain transactions.
$5-$20 for any amount is comparable or much less than almost any international transaction fee. If you're other option is transferring money out of the authoritarian country into your destination then this could be very attractive.
Keep in mind that this purely the onchain transaction fee.
You are also going to paying exchange fees each way and those fees are likely to be quite large in authoritarian countries (as any illegal activity is generally more expensive).
Also, in countries with fake exchange values (like Argentina or Venezuela) you get 1/3 of the currency for your dollars, while with bitcoin you get the full value.
I mean my bank (Monzo) charges $0.40 for a small international transfer, and $3.20 for one that is $1000, so depending on the transaction size in most scenarios for me personally bitcoins fees would be WAY higher and will presumably only grow more if Bitcoin gains further adoption.
The problem is that the Bitcoin fee is also payable on all domestic transfers too, which of course are free in traditional banking.
If your account is frozen for whatever political reason your bank can't help you. Bitcoin fees can be 15 cents. I think it is a dollar now. Plus the 10,000 or 100,000 limit you would have could prevent you.
When people stop buying the latest and greatest machines for Bitcoin mining, Bitcoin's price will crash to zero. It will trigger double-spending attacks, which will undermine trust in the network. Gold doesn't have this problem; so gold is better.
Gold has been used to store value for thousands of years, while Bitcoin is a new and experimental technology. It's absurd to say that you would use an experimental technology to store long-term wealth. Maybe once it's tried and proven, fine. But right now it's inefficient, volatile, has high fees, and has got the problem with mining I talked about above.
For clarity: My comments above are directly relevant to the comment above about inflation. Guarding against inflation is about holding onto your wealth for the long term. I was comparing Bitcoin to gold for that purpose -- which is entirely valid.
> When people stop buying the latest and greatest machines for Bitcoin mining, Bitcoin's price will crash to zero. It will trigger double-spending attacks, which will undermine trust in the network. Gold doesn't have this problem; so gold is better.
Nope, you're laboring under a misapprehension. Even if all new compute power stopped being manufactured miners will run their existing equipment. The mining difficulty will plateau and overtime gently decrease as equipment breaks.
Older and less efficient (at computing double SHA-256) equipment can be profitably brought online where the price of electricity to do so is available and other more valuable uses of that energy in that locale are not possible.
You can ride this all the way back down the years and generations of ASICs then GPUs to CPUs. Once humanity is out of CPUs, well, we'll have more pressing issues. We'll talk again then, or not.
Yes, mining and securing the network nevermind transmitting transactions would be difficult with ink, paper, and abacus technology alone. I'd expect gold to hold some value here despite difficulty in securing and assaying it restricting its useble value to technical specialists and institutions. Nonperishable food, water filters, consumable entertaining substances, etc. would be a better bet if you're prepping against a Mad Max level of collapse.
This may be a bit off-topic and I don't know much about crypto currencies, but I do know that one of the reasons Stellar was set up the way it is, is to enable tiny transaction fees so that anyone could participate, including the poor or those without the kind of access to a stable currency or financial services that most of us on this forum would normally expect. Thus, the transaction fees are minimal.
I guess it should be possible to trade bitcoin via the stellar network (according to their intro page[1], any currency can be), but I could well be wrong.
I got some given to me in the Keybase drop so I read up on them, but that's the limit of my knowledge in this area. I'd love to find a way to use them but articles like this talking about ponzi schemes etc tend to put me off bothering.
>Finally, the fact that Bitcoin proponents have to point to poor authoritarian countries to find legitimate usecases is telling in and of itself. It's basically a blunt admission that the technology is mostly useless in the US.
You say that as though it makes it all but useless, despite the value it provides to people in those countries... that's very telling in itself.
But as I said there are many use cases, I just pointed out a few that I thought were most important on a global scale... because, you know, it's not all about people in wealthy developed nations.
But outside of those types of countries, and in countries like the US, the self-serving use case is a hedge against inflation. If inflation doesn't worry you, that's ok, but the recent money printing in trillions of dollars worries lots of other people. In 20 years I've seen the purchasing power of my money halved. I'm much happier to store my money in an asset that, so far, is seeing its purchasing power increase year on year.
From a technical standpoint the other use case, over the lightning network (and other layers and sidechains), is that it allows for instant micro-payments not possible with the legacy financial system. People are building products like podcast platforms which stream satoshis to content creators for every minute someone listens to their podcast. Others are building systems where every API call can be instantly billed. Or content distribution systems (think Bittorrent) where seeders can be compensated for service.
There are plenty of technical uses cases for a digital native money on the internet.
If you don't understand why it has utility I don't think there's anything more I can say to convince you. Sorry.
To begin with this assumes a refugee with substantial enough assets to transmit abroad. Before Bitcoin such people paid a bribe to get those assets out. Now they pay some broker a purchase fee and withstand the market volatility. A big loss either way.
I invested in BTC years ago because of those 2, I expected the value to grow as adoption grows. And BTC seems to me back then that it was a great way to store my hard earned money and I can bring it with me anywhere safely.
Thanks for pointing this out. People have different reasons why they believe in bitcoin (and other cryptos). Where I live the government has in the past 20 years wiped out citizens' savings at least 3 times, arbitrarily, without any notice. In such a situation using bitcoin, regardless of the risk/skepticism, is a far better alternative than having all your money disappear on the whims and or experiments of politicians. Once I get sufficiently knowledgeable about cryptos I will happily take my chances, and I'm sure many in my situation will see it that way.
It's sad to hear this. Is there no way for you to buy foreign currency like dollars instead? Bitcoin might be an attractive asset to speculate in, but I'm not sure if it's the safest way to hold onto your wealth, because of its inefficiency, volatility, the need for endless mining to sustain it, and so on. It might multiply your wealth by 10 or reduce it to zero -- do you really want to take the risk? I understand that what I'm saying might be boring, but foreign currency is tried and truer.
The only thing fiat currency across the world has proven is that it's subject to the whims of bureaucrats and has the theft of inflation built-in. Even the "best" fiat in the world like GBP and USD have seen their purchasing reduced drastically over the decades.
I don't trust politicians to manage their money or economy well. But I do trust code and math that enforces decentralised consensus that can't be manipulated by a handful of powerful people. Some have tried in Bitcoin's short 12 year history, and they've all failed.
You say Bitcoin is inefficient. In comparison to what? By what measures? If you compare Bitcoin to gold mining it uses less energy. https://cbeci.org/index/comparisons
You say Bitcoin is volatile, but that is to be expected for a new form of money that people are still trying to figure out the value of. How long do you think it took for gold to reach a stable point of perceived value over its long history? Bitcoin is only 12 years old.
Need for endless mining? Of course it's endless, it's a vital part of network security in an adversarial environment. As the network stores more value the energy expenditure will need to go up to secure it. This is true of any other store of value. Gold is not only incredibly expensive to mine, it's expensive to secure in large facilities.
The more Bitcoin integrates into the economy and the more wealth it secures, the more energy expenditure it should use. This is by design and a good thing. And if you compare it to other industries (linked above), it is far more efficient than current systems.
Forget "crypto". Most of them are varying degrees of scam or cargo-culting around "blockchain technology" (including Ethereum). Bitcoin is the only one that matters because it's truly neutral and decentralised. It wasn't founded by any company, there's no marketing team or CEO. It's just an open network protocol that people choose to opt-in to because they understand its value proposition to the world. In the same way that there's a separation of church and state, there needs to be a separation of money and state.
You could buy US dollars of course, but you'd have to keep them under your mattress. The banks can convert foreign currency into local currency with a decree. I see your point though, and ideally I'd have some in something tangible, say real estate, but cryptos make sense to a lot of people dealing with crazy regimes.
Bitcoin is not private. It's probably even easier to trace than traditional bank accounts. There are better projects focused on privacy. Monero, for example.
> The properties of it being difficult/impossible to confiscate and its privacy make it valuable in oppressive regimes. A refugee could store their wealth in Bitcoin, leave their country, settle somewhere else, and access their Bitcoin without the risk of it being confiscated during the journey, because they can simply memorise the seed phrase (24 words).
LOL, who in those countries would sell them bitcoin?
You've pulled out an argument I see all the time about the utility of bitcoin, but you can always just tell that it's made by someone who's never lived under an oppressive regime.
It's a first-worlders idea of what thirdworlders can do.
He works for the Human Rights Foundation and advocates Bitcoin for its humanitarian use cases. He has spoken to many people in these types of countries to get their take on it. See for yourself...
I live in one of those countries. Nobody will accept my currency in exchange for bitcoin. I can't send money offshore to buy bitcoin.
I mean, just ask the Chinese how easy it is to get bitcoin today. The billionaires, millionaires, and political elite can get their hands on bitcoin sure no matter where in the world they are, but not the common man (the actual oppressed in those regimes).
> A refugee could store their wealth in Bitcoin, leave their country, settle somewhere else
Problem: Who is selling Bitcoin for local currency in an area where there is a problem which is generating refugees?
Sure - you can electronically send Bitcoin to people, but how is the seller going to receive local currency from a war torn region without being local themselves? And if they are local...why are they selling their Bitcoin?
Remember - this is an area presumably in some form of collapse. How is a refugee going to transact their savings to another party who can accept them safely in the first place (rather then say, just being robbed - presumably why they're fleeing).
Stolfi was my professor at Unicamp and has become a somewhat famous buttcoiner. His laundry list of arguments always depend in this "let them have cake" mentality of people living in a world of functioning institutions. It is almost ironic how someone who lived through all the economic instability in Brazil never bothered to look at the practical reasons that lead to people holding BTC.
With that said, each day that goes by I am more inclined to agree with him in relation to Bitcoin and all projects that tout "fixed supply", "store of value", PoW crap.
I agree that the unbanked and people that fear persecution or censorship can benefit from crypttocurrencies. The part where I don't agree anymore is these people have BTC as their best alternative to protect their wealth or to be sovereign over their finances.
Using this dumb definition of a ponzi scheme, every stock IPO that doesn't pay a dividend is a ponzi scheme. Bitcoin is valuable because people agree on using it as a form of money, and it is limited in supply. Nobody is making more bitcoins from nowhere to pay out existing bitcoin holders.
Idiotic definition of a ponzi scheme crafted intentionally to include bitcoin, fails to include bitcoin, but does cover many valid economic activities.
> every stock IPO that doesn't pay a dividend is a ponzi scheme
I agree with you in spirit. Stocks that will never pay a dividend (if you can see the future) are worth $0. Most stocks are effectively speculative assets.
The difference is that a stock has a real, legal value: ownership of a company that has cashflows. If that company is liquidated, you have rights as a shareholder. You may also be able to vote on important decisions that the company makes.
Bitcoin is an asset that, by definition, never will pay a dividend. It is a stock that we know with certainty is worth $0. Its only value is speculative.
In that sense, Bitcoin is very much like fiat currency: its value is imaginary and based on how other people value it.
But if we're comparing Bitcoin and, say, USD, then Bitcoin is by far the worse currency because it's deflationary and unbelievably expensive to transact.
That's why, in places with unstable currencies, people mostly shelter their money in USD. If cryptocurrencies factor into it, it's because those currencies are seen as easier ways to transact USD. People who need their assets to be spendable on a daily basis don't hold them in Bitcoin.
What do you even mean when you say something is worth 0? How can a share of stock that you can sell at any time for an amount much larger than 0 be 'worth 0'? Things are worth what you can sell them for, and that is the only definition of value that isn't nonsense.
You want currency you hold to be deflationary. Deflation is a systemic problem for economies, not individuals with cash in hand. Its not expensive to transact, it is extremely cheap. You go find a provider to let you accept payments from anyone in the world for a smaller % of the transaction and that will cover chargebacks. It doesn't exist, and you are not doing an honest analysis when you compare the transaction cost of walmart instead of yourself, or the cost of exchanging cash without the costs of moving people to the same location to exchange it.
You have no practical legal right to anything as a shareholder. If a company is liquidated the shareholders get nothing in practice. Management controls the finances and expenditures of a company, and a majority of shareholders control management. This control is usually only given to special classes of stock that is for the most part impossible to buy. Why do you think people fight over control of companies? Management routinely steal huge sums by allocating it for the direct benefit of some shareholders over others.
A very very minute percentage of bitcoin is used in transactions. The vast bulk of it is seen by its users as an investment. And historically there have been Ponzi schemes that allowed people to cash out before the scheme fell apart — but it was always a small minority cashing out.
As of June 30, 2012, the $100 bill comprised 77% of all US currency in circulation. Federal Reserve data from 2017 showed that the number of $100 bills exceeded the number of $1 bills. However, a 2018 research paper by the Federal Reserve Bank of Chicago estimated that 80 percent of $100 bills were in other countries. Possible reasons included economic instability that affected other currencies, and use of the bills for criminal activities.
Seems to fluctuate quarterly and I was saying the article addresses the point and makes an argument that BTC is not “like gold” in this way because the majority of demand for gold comes from non-investors (which appears to be the case in I think most quarters but perhaps not most recently). Jewelry is its own category but it does have “utility” if viewed through the lens of human behavior across civilizations over time.
>the majority of demand for gold comes from non-investors (which appears to be the case in I think most quarters but perhaps not most recently)
There's actually been far more industrial usage proportionally recently than any prior year. Prior to 2020, the highest industrial usage year was 2016, at ~7%. The article is wrong; the VAST majority of the demand for gold does indeed come from investors. This is ignoring gold's historical status, of course. Before the advent of modern computing, there was extraordinarily little "practical" use for gold beyond use as tooth fillings. And yet, it is during this time that gold was most coveted. Why is this? Economists have been debating that for a century! :o)
>Jewelry is its own category but it does have “utility” if viewed through the lens of human behavior across civilizations over time.
Jewelry does have utility yes, but gold jewelry has no marginal utility over, say, brass jewelry, other than the material composition. And yet, gold jewelry commands a far higher price, and despite even this, it is still in higher demand. This is because buyers place a premium on the metal itself, hence why I referred to it as a para-investment.
Gold's coveted status is fairly easy to identify. It's one of the few physical elements that is (a) somewhat rare and difficult to mine (b) has an exceptionally long shelf life, even under harsh conditions e.g. under ocean water and (c) can be authenticated with simple tests e.g. nitric acid.
(A) applies to a number of metals, including ruthenium, iridium, rhodium, and osmium, all of which are less abundant than gold. Although industrial demand has caused the price of those to rise in recent years, the difficulty of extracting them gave them essentially no value historically. Production difficulty may cause the production cost of a given asset to rise, but in a market that must also be met with equivalent demand lest the effort be in vain. For example, I could go outside, pick up a large rock, and spend the next several days crushing it into a fine powder. This would be a fairly difficult process, and yet the end product would be worthless. Rarity does not automatically equate to value.
(B) is perhaps gold's most unique physical property, but given the historical prominence of silver (a metal that corrodes rather easily), I seriously doubt that this alone justifies a single ounce of gold historically having been worth an average person's months of wages.
(C) is true of many metals, and has only come into existence as a method for verifying gold in more recent years, which again belies its historical value.
Go to Coinbase and try to figure out how to use Bitcoin to buy something with. All they talk about is Bitcoin as an investment.
A currency can’t be an investment as the expectation that it will rise in value undermines the main quality of a currency, which is to maintain a stable value, so it can be used as intermediary.
>Go to a gold exchange and try to figure out how to use it for microchips.
The idea that gold is useful as a store of value is ridiculous. You have painted the picture perfectly with your comment. It is not easily moved. It is not easily utilized. It is worthless to the average person and it’s price is heavily inflated.
Most Ponzis and pyramid schemes are built on something that has a legitimate use.
After all, the eponymous scheme by Charles Ponzi was built on legitimate postal reply coupons.
So a list of non-monetary uses for gold is not evidence that its monetary uses are not Ponzis.
Most financial instruments are at least Ponzi-adjacent in that their value is derived from the expectation that other market participants will pay more for them than you did.
Whether it's real estate or equities, precious metals or cryptocurrency, profit requires an infinite cycle of growth that must collapse at some point.
We don’t have data and what if they convert back into fiat? Would you say that foreign workers who get paid in USD and send money back home only use USD as a ponzi?
You don’t need data to see plainly that the vast majority of goods are obtained with fiat. As such, someone selling goods for crypto has no choice but to use fiat as well.
I don't follow? They are saying that in order to run a business in which one sells goods or services for cryptocoins, that in order to pay for one's business costs, one must spend fiat,
and that therefore, someone selling goods for cryptocoins, must, in addition to using cryptocoins, also use fiat currencies (because most of their business expenses can only be paid in fiat currencies).
People don't use cryptocurrency "in exchange for goods" to any significant extent. Major merchant adoption of Bitcoin peaked years ago. And at least in my area, the same goes for local merchants; Bitcoin here is extinct.
Bitcoin is doing what, 100m transactions per year? Most of which are not for physical goods. Venmo, which started around the same time, does over 2 billion. M-Pesa, a "digital money" solution the same age does 15 billion. US credit transactions? 45 billion. Debit? 75 billion per year. And unlike Bitcoin, most of those are what people would call real transactions. Bitcoin's real use is a rounding error.
Cryptocurrency can be here to stay and also be driven by scams. Set up a Google News alert for "Ponzi scheme". Ponzi was active 100 years ago, but his approach is more popular than ever. As they say, there's a sucker born every minute.
Can confirm this. I offer some crypto options to pay for my service online. Not BTC because the transaction costs are too high, but Bitcoin Cash and the like.
After about a year, only about 0.3% of checkouts were done with crypto. Even manual bank transfer is used magnitudes more often.
Thanks, that's good to know. Another confirmation: thanks to the Epik leak, we know the same is true there. Their Bitcoin transactions table is much, much smaller than their other ones.
I think bitcoin is a ponzi scheme, but the article (and so far I haven't seen it mentioned in the discussion) doesn't mention the following reasons which capture value in bitcoin:
As long as you don't steal the electricity you need to pay for it in fiat. And you not only need electricity to mine new coins, but also for transactions
Ransomware creates demand in bitcoin and this demand keeps the value up.
A bit ridiculous simplistic clickbait article... if the author had any intellectual honesty he would realize his arguments on gold NOT being a ponzi could be used exactly the same for Bitcoin:
"First, few if any gold investors have expectations of profits. They generally invest in gold as a hedge -- a "store of value" -- that they hope will retain its value in case other assets go sour."
Actually almost every other point he tries to make on things NOT a Ponzi could be made for Bitcoin too.
684 comments
[ 2.9 ms ] story [ 358 ms ] threadThe entire forex trading industry: am I a joke to you?
Hearing your friend got into Forex is about the same as when they get into Amway, Tupperware, DoTerra, or Herbalife …
https://en.wikipedia.org/wiki/Black_Wednesday
https://en.wikipedia.org/wiki/Foreign_exchange_market
Having said that, speculating on FX is a zero-sum game, which I'm not generally in favor of.
Now apply that to Forex. There are players who needs to hedge against target currency devaluing and others who are willing to take the risk premium. That you can gamble on it if another matter but then again, you can gamble on many different otherwise useful financial instruments.
https://www.statista.com/statistics/273418/unadjusted-monthl...
> real estate
> stocks
Sure, these things aren't ponzis. What about art and stamp collecting, though? How are they not ponzis under this definition?
I can't see any conceivable way that happens at this point. Even a coordinated effort by the world's governments to "ban" it (they can't really ban it) would not drive its price to zero... if anything it might even have the inverse effect.
Can you provide any conceivable way this would actually happen? Maybe an asteroid hitting Earth and wiping out all human life on the planet?
1. Tether defaults.
2. People panic and sell at whatever price they can get. Let's say Bitcoin drops to $10k.
3. All miners that don't make a profit at $10k shut down.
4. With most miner's shut down, block times go from 10 minutes to 1 hour.
5. The fees to transact Bitcoin go up exponentially as people rush to get out. 10 Bitcoin to make it into a block, sure!
6. The price drops further.
7. More miners stop mining.
8. Block times go up so much that it will take the miners YEARS to reach the difficulty adjustment point that normally hits every 2 weeks.
9. Blocks stop being created, and the price is essentially 0.
With China shutting down a lot of their mining, this is less likely than in May. The higher it goes, the more likely that a sudden shock can destroy it all. Eth has shorter block times and would be able to stabilize better. The block fees going up might actually save the system to keep enough miners mining, but I also think they will scare users away from buying at cheaper prices.
I think some of these are a stretch. I think some of these would definitely happen if the things up to them happened.
if the stakes are high enough, code is not law, even in btc land
I have no idea how that would end up, how quickly they could organize, and what would happen in the mean time.
I am little bit paranoid of holding 100% in BTC, the reason for this is because of Satoshi Nakamoto still holding 1 million BTCs. Nobody knows who this guy is, if he's going to spend all his bag, that's a sure fire way of bringing down BTC significantly.
Anyway, I'm still in to BTC, it significantly changed my life. I wish Nakamoto would publicly burn most of what it is in his bag.
Exactly, crypto doesn’t even claim to have legitimate investment profit. All of it is from newcomers pouring money into the pot…
What if people are seeing discussion of minting a trillion dollar coin, trillions in QE, 25% of all dollars created in the last 12 months…and concluding that fiat currency is in an endgame and they are permanently trading what fiat they have now for one of a finite number of digital assets that will ever be created.
As Michael Saylor once said in an interview: “It’s the superior asset, Laura”
It's a new shift, but I think quite profound.
Edit: If you're referring to mainstream media, the dollar value is all that most would be able to put into context. For those deep in the space, we're thinking about dollar values less and less. My primary benchmark on overall portfolio value is the value denominated in ETH, not USD.
Although USD might be your preferred, many would happily sell a vehicle for compensation in BTC, ETH, silver, gold, euros, etc.
"Oh shit, the internet went out. Hope the value of my ETH doesn't crash through the floor while the internet is down...."
For people that look at it like that, sure. That's not how everyone looks at it though. I personally look at it with the aim of acquiring as much ETH as possible because I can see that the future economy will be built on it and eventually things will be priced in ETH.
Just because the transitions are slow and you don't see it happening, doesn't mean that there's not a transition happening.
Edit: Not sure why the downvotes, but it's still true and still likely true for the forseeable future.
The author of this blog post's claim that 99.99% of people in crypto are only participating because of expectations of future profit is unsourced and a fiction that he has created based on preconceived notions.
Don't participate if you don't want - I like participating in a system that isn't being tracked by agencies especially with news of Treasury actively building out systematic functionality to investigate any bank accounts with transactions exceeding $600
The crypto financial news community was writing about this long before Fortune picked it up.
You are exactly incorrect.
Cash represents the overwhelming supermajority of laundered funds and ongoing credit extended across criminal elements.
https://www.swift.com/sites/default/files/files/swift_bae_re...
Cash is the heart of the criminal economy, crypto is creating a transparency that doesn't exist in traditional peer to peer physical transaction systems like cash or IOUs.
I'm done with this, nothing productive is coming out of this conversation.
Your reply is also confused. Is the majority of money laundering denominated in USD and other real currencies? I'd believe it, because that's where the money is. But I'm saying the proportion of Bitcoin transactions that are fincrime-related is surely much higher than that of total USD transactions.
This seems pretty obvious to me given that Bitcoin is much less useful for quotidian transactions, but much more useful to people engaged in assorted financial crime. That's unsurprising given how much cryptocurrency advocates tout privacy/anonymity as features. But if you think otherwise, feel free to show the data that has convinced you otherwise.
Also, it's bad form to read something, go on a rant, and then declare the conversation over. Especially when the rant is incorrect.
> The estimated amount of money laundered globally in one year is 2 - 5% of global GDP, or $800 billion - $2 trillion in current US dollars. Due to the clandestine nature of money-laundering, it is however difficult to estimate the total amount of money that goes through the laundering cycle.
From Treasury via ABA Banking Journal (https://bankingjournal.aba.com/2015/06/treasury-u-s-money-la... and https://home.treasury.gov/system/files/136/2018NMLRA_12-18.p...):
> The United States continues to estimate that domestic financial crime, excluding tax evasion, generates approximately $300 billion of proceeds for potential laundering, based on the sources and analysis cited in the 2015 NMLRA. Criminal prosecutions and law enforcement investigations indicate that most of the money earned from crime in the United States stays in the United States, but also that the United States is an attractive destination for illicit funds generated abroad.
The news media did not create the gold rush mentality around crypto, it has been there almost from the beginning. Go and read the bitcointalk forums for evidence, if you want.
I like having spending power that isn't immediately based on CIA organized crime or boomers at the Fed/Treasury
Money without an army is just paper. Or, in this case, imaginary numbers.
There will be no one to cry to when the machines start cracking all the hashes and wipe away the entire ecosystem.
I'd wager the NSA already has this capability, but they won't blow it on something so stupid.
JQI at UMD, NIST's Quantum Computing Group - these teams must be doing something with all the grant money
It uses XMSS, and does it fairly well.
But if quantum computers start breaking encryption, crypto currency is probably pretty low on the list of worries…
https://en.bitcoin.it/wiki/Quantum_computing_and_Bitcoin#Mit...
IMO he comes off a grifter who needed to save his company and kept buying loads of BTC to start the "institutions are buying" FOMO.
He's probably referring to the lightning network, which is theoretically capable of handling millions or even someday billions of bitcoin transactions per second.
What if my grandmother had wheels?
More seriously, how many people do you know are seeing what you are talking about?
Everyone I know that invested in crypto did so hoping to trade it back later on for more fiat than they paid. Sure, maybe it's a biased sample, but it's a sizeable sample and I do not know even a single person that traded their fiat for crypto definitly.
I don't invest in a credit card for spending. I use a credit card, though.
One day, there will be a final generation left holding the bag.
That's why I see crypto tokenization as an important step towards having another "financial material" to work with. It doesn't commandeer enforcement at a global level, so it doesn't compete with governments on their own terms, but it can help build trust at scale by being designed around the trustless scenario, which reduces reliance on enforcement and bureaucratic methodology in many applications. Crypto projects with a focus on achieving good governance are some of the most promising out there, even as they are hidden in the endless waves of scams.
When you own a share of Apple you literally own a fraction of their factories, IP, etc.
When I started mining bitcoin no one was talking about it every have a USD value. It was just silly internet points that you could pass around to friends. I also know a lot of people who hold as a store of value believing that it will easily outlast the US dollar.
Just because all your friends are clowns doesn't mean that those are the only people that exist.
Could you share some numbers?
And? Should we should look at it through a lens of a non-traditional Ponzi scheme? Ponzi 2.0 is better than Ponzi 1.0?
> What if people are seeing discussion of minting a trillion dollar coin, trillions in QE, 25% of all dollars created in the last 12 months…and concluding that fiat currency is in an endgame and they are permanently trading what fiat they have now for one of a finite number of digital assets that will ever be created.
If the Debt Bubble is nearing its end and fiat currency is in grave jeopardy, what is the mechanism by which the people holding these "digital assets" will save themselves from the economic hell that awaits the world?
[1] https://en.wikipedia.org/wiki/Wildcat_banking
* Within margin of error
Meanwhile, the total number of people who view bitcoin as a permanent allocation in their asset portfolio will have increased drastically, and they'll keep on stacking sats.
Each boom bust cycle operates this way. A minority of new investors become true believers, and the rest of the chaff wash away in the crash.
That would have been a plausible explanation, if not for the abundance of digital currencies. There are now many more times crypto assets than there are actual currencies in the world, and new ones seem to be created every day. There is absolutely nothing "finite" about crypto anymore.
I strongly believe bitcoin will be the new gold one day, if it doesn't pan out as a currency. It sounds insane, but I actually believe the Winklevoss twins when they say Elon and SpaceX will be able to mine gold on asteroids within the next 20 years, which would crash the price of gold. Not to mention as everything inevitably moves digital, we need to have a digital store of value.
What is the energy cost to get a refined kilo of gold back to Earth?
Hayabusa, 2005 - $100 billion dollars per kg
Hayabusa 2, 2019 - $33.3 billion dollars per kg
OSIRIS-REx - 2020 - $491.7 million per kg
Chang'e - 2020 - $104 million per kg
https://www.youtube.com/watch?v=tY6aCg5InzY&t=170s
Seems to be trending downward... Who knows if it'll be enough.
I was curious if a similar downward trend existed for solar panels...
"In 1956, solar panels cost roughly $300 per watt. By 1975, that figure had dropped to just over $100 a watt. Today, a solar panel can cost as little as $0.50 a watt."
https://news.energysage.com/the-history-and-invention-of-sol...
So, that's a factor of 600 to get to present costs. Gold currently costs $56,500 per kg. So, $33,900,000/kg. So, who knows where we could be in 50-70 years. Plenty of time to switch the entire global economy to Bitcoin, I suppose!
what would be their incentive to do it, then?
On the other hand, if one were to buy proven gold reserves stored on an asteroid, then that might make sense. The exploration company could discount the value of the gold by the existing cost of sending it to Earth and the ongoing cost of guarding it which will necessary given an absence of enforceable property rights. As the cost of terrestrializing shrinks and potential value of off-Earth use grows the value of the asteroid stored gold would increase over time.
What if I told you they could send asteroids to the planet to be mined _on the planet_ and crash the price of gold?
DART is a planetary defense-driven test of technologies for preventing an impact of Earth by a hazardous asteroid. DART will be the first demonstration of the kinetic impactor technique to change the motion of an asteroid in space.
https://www.nasa.gov/planetarydefense/dart
I'm no crypto currency fanboi, but I feel no need to commit the intellectual fraud of misapplying well understood concepts to denigrate it. Every couple of months, however, someone decides they can score some clicks by yelling 'Ponzi' and we get this headline again.
In addition to being tedious it's also dangerous. Blockchain and cryptocurrency is new phenomena and we don't yet know what value there is here. We can, however, confidently assume that if the false narrative that Bitcoin is a Ponzi Scheme is successfully applied The Great And The Good will suddenly discover the moral obligation to crush it out of existence and criminalize everyone involved.
That possibility worries me far more than whatever part of the status quo bitcoin might disrupt.
And it puts the blatant “Join the Ponzi scheme early!” stuff I’ve seen on crypto forums into an amusing paradoxical state.
Blockchain and cryptocurrency is over a decade old. Several lifetimes in tech. So far the use appears to be speculation, fraud and burning through electricity as fast as possible.
I hope they do crush it, for that last bit alone if nothing else.
HN doesn't know everything, do your own research, use your own logic.
This whole thing is just bringing the level of discourse here down, and I've been on HN for a long time.
I'm in favor of a blanket ban on crypto discussion here. It's all noise at this point.
Unless you mean specifically "missed the opportunity to make lots of money", in which case sure, that's absolutely accurate, but if I wanted to gamble I'd just go to a casino.
It's funny how people on HN which are likely some of the first people in the world to know about bitcoin (eg. since it was only at $100 or less) keep upvoting articles like this for years now.
I think these people deep down know that they missed an amazing chance by not investing in bitcoin (and other cryptocurrencies) years ago, so articles like this make them feel better about it and lets them justify not investing in bitcoin to themselves.
But then in a few years bitcoin 5xs again and then they realize if they bought it at todays price would still have made them massive profit.
But then they see a new article saying bitcoin is a ponzi and upvote it and feel good about themselves again.
Oh but they have to downvote any comments like yours too.
Sigh.
Is there any non currency use case of blockchain?
NFTs (Not just art but concert tickets like GET protocol, gaming like Axie Infinity, collectibles like Crypto Punks, etc)
DAOs (Internet scale corporations/governments)
Identity systems (ENS, BrightID, Proof of Humanity, etc which allow for supranational products that build on top of reputation and uniqueness. The Sign-In With Ethereum standard is bringing self-custody OAuth authentication to Web 2.0 applications)
Enterprise interoperability (Baseline)
There's a ton of stuff going on and it's almost impossible for any one person to keep up with everything. It's easy to write everything off as a scam but there's hundreds of thousands of really smart and high integrity developers working in this space and it's worth keeping an eye on.
The current bitcoin transaction fee is more than 100x what my bank charges, so no, not really.
A bitcoin transaction is settled as soon as the block is mined. Without any third parties or trust involved, and no way to reverse the transaction. While a bank transaction could settle in days and always with some trusted third party.
Try making a transaction over the lightning network (layer 2 tech of bitcoin), it’s instantly settled and almost for free. The whole country of El Salvador is making transactions within the country using this technology and they’re getting remittance from outside the country far cheaper than banks.
It boggles my mind that people genuinely believe this is a good thing, especially in an ecosystem so rife with scammers.
I get that it's rather integral to the primary use cases of bitcoin, but that doesn't mean you have to pretend it's a good thing when marketing the currency to the average joe as a PayPal replacement.
Because there's absolutely no protection against fraud. This is somewhat of a problem when there's such a gigantic amount of fraud going on.
> You have to accept responsibility when making transactions
Yes, and so does the other party.
What irreversible transactions do is give the receiving party the ability to shirk all responsibilities, because it's significantly more difficult (if not impossible) to hold them to account.
The purpose of blockchain is decentralised consensus for the Bitcoin protocol. It has fulfilled that function very well for the last ~12 years.
There MAY be other legitimate use cases, but the majority of them right now are varying degrees of money grabbing scams or cargo-cults.
There's also interesting things going on in the NFT space towards MMORPGs based around an economy of in game items being themselves NFT's. It's not all stuff and nonsense and jpeg millionaires lol :)
Some of it is, surely, but as time goes on more and more technologies will use it to greater effect with more utility beyond merely, "prices go up".
Is it theoretically still possible to make a profit with that kind of hardware nowadays?
Please someone just tell me. I have no interest to do research into this. I just feel sadness for the crypto-bros.
The others have become a proxy for Bitcoin.
Going a bit more in-depth: Mining is a competitive activity. Your chance of being the person to mine a block is proportional to the fraction of the hash rate of all miners you hold. Therefore, if everyone is using super advanced mining hardware and you go in with a GPU, you hold an insignificant fraction of the hash rate and have next to no chance of actually mining a block, while you still spend on power and hardware maintenance - which will probably make mining a net negative for you.
Nowadays BTC mining is advanced enough that the only way to make a profit is with big specially-designed rigs located in places with access to very cheap energy sources.
What if your ponzi becomes a globally accepted currency.
It's one of the most exciting things happening in tech right now, and HN is at best ambivalent and at worst openly hostile to Bitcoin.
Why wouldn't the tech crowd be excited about digital native money which is perfect for the Internet?
Look at what's happening around the ecosystem with the Lightning Network, Impervious.AI, RGB etc.
https://rgb-org.github.io/ https://www.impervious.ai/
You may benefit from reading about why Bitcoin works the way that it does, and why certain tradeoffs were made.
But you don't really care to know, do you?
throughput of a blockchain is contingent upon tweaking but for the original bitcoin, still used, it's 6 mb/hour. electricity consumption is 14 gigawatts. if i were given 14 gigawatts of electricity i think i could do better than 6 megabytes/hour.
That for an open and fully accessible, decentralised system that exists in an adversarial environment there has to be a large cost to any attacks?
Of course there are much more efficient ways to store data, but those are centralised and vulnerable to the problems of centralisation. The blockchain's and proof-of-work's purpose is to be decentralised.
Looking at the comments here it's almost like a political debate where they keep trying to come up with justifications.
The bit that's lacking is an understanding of money, and what makes certain types of money sound or unsound. It's easy to overlook the problems of fiat money because its all we've ever known.
What was it about gold that made it the dominant form of money for literally thousands of years? Why was it abandoned? How does Bitcoin solve the problems of gold and fiat?
Vijay Boyapati (ex-Google engineer) does a pretty good job of outlining this in his article.
https://vijayboyapati.medium.com/the-bullish-case-for-bitcoi...
I wish more people on HN would read it with an open mind.
If you define them by their "best" use, then knives are tools and Bitcoin is a currency.
Hahaha somebody let GameStop, Tesla, and Virgin Galactic know about this rule.
This is a very simplistic view of equities markets and does not explain penny stocks, meme stocks (GME/AMC), TSLA, and other things that seem to escape traditional fundamental analyses.
Since that exceeds the lifespan of well over 99% of the population, it must follow that people are not investing in stocks because they expect the company to produce some external source of revenue that will eventually repay the principle. There are a host of complex reasons why people invest including wealth preservation, a desire to support a company they are interested in, speculation, a belief that investing is smart and the right thing to do... these are all fine reasons, but they have little to do with some kind of fundamental valuation that some people think stocks intrinsically have.
The vast majority of gains from the stock market have next to nothing to do with external sources of revenue.
You have a shareholder vote, okay but the percentage of shareholders who actually vote is roughly 9%. The only people doing the voting are large institutions, not individuals:
https://www.broadridge.com/proxypulse/reports/2013/second-ed...
The reason for this can be understood in many different ways, but one way I like to look at it is if paying a dividend had no effect on the price of a stock, then one could in principle buy a share of the stock at a price of X just before the dividend is paid and then sell the stock at a price of X just after the dividend is paid just as you describe, effectively pocketing the dividend and earning an almost risk free return.
Of course in practice we know that on average the price of a stock drops by the exact amount of the dividend paid, and hence collecting a dividend has no overall effect on the value of a stock.
To better familiarize yourself with the literature, perhaps you can start with this seminal paper produced by the Federal Reserve:
https://www.jstor.org/stable/2962249
It looks at both the short term and long term impact of dividends and shows precisely that the marginal price of a stock drops by the amount of the dividend, meaning your premise that you can simply just sell the stock at a future date for the same price you bought it for is just not supported by the facts.
Whether you hold the stock and collect multiple dividends for 10 years or 10 days, the fundamental principle is the same: a stock with a marginal price of X that pays a dividend of Y will on average decrease in price by Y. Dividends produce no change in the overall net value of a portfolio, all a dividend does is convert one form of value into another, but no increase in value is ever produced.
https://finance.yahoo.com/quote/IBM?p=IBM
Since a minority of stocks return a dividend, then the holder of said stock likely never sees a cent of company earnings. Time duration to recoup cost of stock by P/E is NaN.
The vast majority of gains from the stock market have to do with inability to invest in new ideas (on both supply and demand side).
https://www.quora.com/What-percentage-of-publicly-traded-com...
It's not that simple.
Tesla unfortunately undermines your argument. Has it been hyped to the moon? Definitely. Is there a good chance people will lose a lot of money on it? That too. But they make actual cars that get actual people actual places. That is the kind of actual value creation that underlies most stocks.
There are many different reasons to own Bitcoin, however the author seems to only view it through the lens of someone living in a wealthy and developed country with financial stability.
The properties of it being difficult/impossible to confiscate and its privacy make it valuable in oppressive regimes. A refugee could store their wealth in Bitcoin, leave their country, settle somewhere else, and access their Bitcoin without the risk of it being confiscated during the journey, because they can simply memorise the seed phrase (24 words).
It's predictable issuance schedule also makes it valuable in countries suffering from high inflation or hyper-inflation.
This is a good article to rethink the use cases of Bitcoin: https://bitcoinmagazine.com/culture/check-your-financial-pri...
Alex Gladstein works for the Human Rights Foundation and does lots of good work in Bitcoin advocacy. His other articles are worth checking out.
And the data backs this up. Some of the biggest growth in Bitcoin users around the world have been in places around Africa and Vietnam who are subject to some of the situations mentioned above.
Do you think these people see Bitcoin as a "Ponzi"? Do you think they care if such a definition doesn't change the properties they find useful/valuable?
https://xkcd.com/538/
But they have to know someone holds it in the first place. You can walk around with a seed phrase in your head and no one would know.
They aren't going to immediately execute everyone who is crossing the border. Even in authoritarian regimes, some people may be able to leave, and borders are not completely shutdown.
And in that situation, for those people, it is useful to be able to carry money, in a way where they do not know that you have it.
I think you fail to understand the power of a true authoritarian government, particularly if they can monitor and limit your access to the outside world.
* Use a VPN, you're guilty of Treason.
* Use a currency other than the North Korean won, you're guilty of treason.
* Use an electronic device other than state sponsored devices, you're guilty of treason.
All executions will be recorded for posterity and broadcast to the people as a reminder of the power of the state.
However, as soon as they start doing that to the first few people, what's going to stop everyone else from instantly sending their bitcoin to family and friends across the border for safe keeping?
With wealth like gold, land, oil, or any other physical resources, an oppressive regime can just kill all dissenters and take control of everything. The payoff to violence is huge.
But with a digital wealth like bitcoin, which can flee the country at the speed of light, even if the owners can't go with it, the payoff to violence evaporates. The oppressive regime that spends a lot of time and energy torturing and killing people will have no spoils to show for it.
The only wealth people could offer for Bitcoin is wealth in a country with an oppressive regime. Who internationally can even take possession of that to cover their expenses?
The only plausible option would be to actually just setup a mining rig and mine the Bitcoin, since presumably for a while their might be an electricity grid their and the BTC network ascribes value to that activity...except you can't mine on commodity hardware to anymore either.
Sure, there’s very tiny amount of people who use Bitcoin as you described. But so there’re people who get benefits from smoking.
As the article states, check your financial privilege.
And "tiny amount of people"? What's "tiny" here? Hundreds, thousands, millions? Do you know how many people use Bitcoin in this way?
Do you?
https://blog.chainalysis.com/reports/2021-global-crypto-adop...
It's very hard to get exact numbers of users, because of how Bitcoin works, but this should give you a good sense of proportions and you could infer numbers of people based on known population sizes for each country
"We calculate the metric by estimating total cryptocurrency received by that country, and weighting the on-chain value based on PPP per capita"
Weigh how?
"we rank countries by their P2P trade volume and weight it to favor countries with lower PPP per capita and fewer internet users"
Weigh how? How do you get the numbers on internet users?
"We rank all 154 countries according to each of those three metrics, take the geometric mean of each country’s ranking in all three, and then normalize that final number on a scale of 0 to 1"
What?
It's not a methodology conductive to analysis. Is a hodge-podge of smart sounding words that create pretty graphs.
Oh, and they changed the methodology this year, but still compare results to previous years that used the old methodology. Very scientific
It made me quickly appreciate that a persons ability to transact while not quite a human right, isn't too far from it either. There is no way the government (or financial world) should hold the power to wreck someone with no accountability. Bitcoin as I see it, is a way to shift the balance of power somewhere closer to where it belongs.
I don't hold bitcoin because I think it'll go up in value, I hold it because I don't want someone to tell me I can't pay rent because ... well they can't tell me why, because "sorry, I don't have access to that information"
I’m just shocked; never considered this could happen. Was this related to your employer, and… Well, I should just ask rather than guess :) thank you for sharing, and I’m really sorry that happened.
One of the best decisions I’ve made recently is to set up a company for myself. More specifically, I set up a non profit “for the world” (mostly as an intellectual exercise of “how hard would it be to mimic what openai originally set out to do? Turns out, it’s not hard!) which then put me in a position where I knew exactly how to set up an LLC for myself for consulting, and how to set up a bank account (use https://www.mercury.com — don’t use anything else).
The takeaway is that, if you’re in the US, you can have protection from exactly this sort of thing, for roughly zero cost — in Missouri the filing fee for an LLC was a whopping $50. That’s how much it cost me to set everything up, start to finish.
I now have a business banking account, quickbooks takes care of the taxes (admittedly $24/mo isn’t “totally free” but it’s also “pretty cheap” relatively speaking) — which means that yes, someone could freeze my LLC (hello IRS) or freeze my personal account (hello US Bank, you suck) but it’s highly unlikely both will ever be frozen simultaneously, unless both the business and my personal accounts are under scrutiny simultaneously.
The cure for that is very simple, as long as you’re rigorous: income comes in to your Mercury account; it flows out into your personal account, by paying yourself a salary. Never use the Mercury account for anything else. Congratulations, your LLC is almost impervious from problems. (My famous last words; the fact is, I have no idea what I’m talking about, and this is what I’m expecting to be true as t approaches infinity).
So yes. Bitcoin: good solution. LLC: also good solution. Wish I’d taken advantage of it sooner.
Unsure about outside of the US though, sadly. Though I’ve often toyed with the idea of making a company specializing in setting up one of those offshore bank tax havens, and offering a product like Stripe whose sole purpose is to automate that. :) Then everybody gets the loophole, rather than a rich few.
Anyway, thanks again for sharing that very unexpected story; I hope it never happens to you again!
However, I will say that one business wanted to hire me full time, and I refused and asked for a higher consulting rate, which they agreed to. So it’s not impossible for your next job to end up similarly.
But then you don’t get benefits (my wife’s health insurance covers us both), sick days, and you probably have to log hours (to my surprise). So even if it’s more lucrative for me right now, there are definite reasons this path isn’t suitable for everyone.
Definitely consider it if you can swing it though. And also, you can simply invoice yourself for services rendered from your LLC, which effectively transfers money from your personal account to the LLC. I’ve had to do this to bootstrap funds into the account (since your balance starts with $0, which is useless).
The problem is tax. There are two issues. One is that an LLC is a pass-through entity. That means all profits are expected to pass through immediately to your personal account, or used immediately on business expenses. If you try to maintain a $20k balance for a year, for example, you’ll discover that this balance counts against your deductions for that tax year (effectively a negative $20k deduction). Or at least that’s my understanding so far.
Therefore, as with most things, you should ask an accountant for advice. But that’s an unsatisfying answer. My answer was going to be, therefore, you can create a C Corp instead of an LLC, and transfer some of your personal funds into that (by invoicing yourself).
The problem (argh, they never end) is that the income will be taxed for the Corp, and then taxed again when you pay from the Corp back to yourself. This is precisely the “double taxation” problem that LLCs were designed to solve!
The reason it still might make sense is because of all the incredible benefits of setting up your own company. For example, merely opening a Mercury account at all means you can redeem $5k of aws credits. $5k! I’ve done this! To my surprise, it happened!
And that’s just one of like 80 Mercury perks. There are so many, and it’s been so much fun window shopping through them all. It’s how I wound up using quickbooks for example.
Plus you’ll have an account that people can wire money to. Mercury has a nice little PDF with all your wire transfer details. It feels like driving a Tesla, whereas US Bank was like not having a car at all. (It was truly one of the worst business banking experiences imaginable. They even managed to lose an incoming $10k wire transfer. Nonsense like that simply doesn’t happen with Mercury.)
So there’s a brain dump of pretty much everything I’ve learned over two months of studying this. The takeaway is that if I had a day job, I would set up a C Corp and transfer a few grand to it by invoicing myself. (No, I wouldn’t use stripe atlas. That’s $500. You can do it yourself for $50, and it’s been surprisingly painless. Both Missouri filing and the IRS EIN were entirely online, so you don’t even have to mail anything.)
Just, uh… perhaps consider it a side hobby. This kind of nerdiness is uniquely fun to me. I imagine that it’s incredibly un-fun for most people. Treating it as a hobby helps overcome that pain, and the risk turns out to be minimal. I was surprised by that.
You don’t get taxed on having a balance; you do get taxed on the income that generated it. (Or am I missing something crazy?)
In one of these links, I am quite certain I saw words to the effect of "if you maintain a balance in the business, then the following tax year, it will count as a negative deduction for the shareholders (i.e. you), because the business type is a pass-through entity, and pass-through entities are expected to pass all of their income through to the shareholders."
The fact is, I don't know whether it was an LLC or a sole proprietorship, and I'm now second guessing what I thought I knew. Because yes, it does sound pretty ridiculous that an LLC needs to maintain a $0 balance or else it will penalize the owners of said LLC. That doesn't sound right.
And yet, words to that effect were located in one of these links. (Hunting for it now.)
EDIT: Welp. Can't find it anywhere. At least I admitted from the outset that "ask your accountant, do not trust me" is reasonable advice for anyone thinking of taking business advice from random HN comments.
I'll downshift to "I don't know whether it's a bad thing to maintain a long term balance in an LLC, but I'll be finding out the answer before the end of this tax year."
If there's no disadvantage to keeping a balance in an LLC, then I revert to "Just form an LLC for yourself; it costs $50 to do so. And you can keep as much money in it as you want, as long as you don't mind paying income tax simply for transferring money into your LLC."
It's possible I was thinking of a negative tax basis for an S corporation, if the S corporation has a long term account balance. But a tax basis is certainly not the same thing as a tax deduction, so I throw my hands up in the air and say "I'll be using a portion of my consulting income to clarify these questions with both an accountant and a lawyer; all advice should be considered suspect."
It's definitely not correct at all. Neither is issuing phantom invoices to yourself to put money into the account.
A bank account is just a vehicle to store business cash, it really has nothing directly to do with the way you should be maintaining your LLC's books. You should be recording things like that as "capital contributions" which increase your "capital account."
Similarly, profits and losses should be booked to your capital account. I would strongly recommend doing some reading on capital account bookkeeping.
I may have given the wrong impression, but to be clear I certainly wasn't recommending using Mercury as your tax accounting software! I was saying that as long as income flows into your LLC's bank account, and out into your personal account, and that you never use your business account for personal expenses, then you have nothing to worry about.
I really appreciate the reference on capital accounts; not knowing how to classify inbound transfers from my personal account was bothering me. That still raises the question of whether there is a tax, and how much the tax is. Are you saying there's no income tax when you transfer your personal funds into an LLC, since capital contributions aren't income?
After pausing and searching for the answer to my own question, https://howtostartanllc.com/form-an-llc/contributions-and-di... -- the answer is probably "no, not even slightly" and also "this is suddenly quite complicated."
https://www.legalzoom.com/articles/how-to-add-capital-contri... seems slightly less complicated:
> If you plan to contribute property, you will need to obtain a market valuation to determine the value of the property you are contributing to the LLC. Capital contributions in the form of property may also attract a number of potential tax consequences, so it's generally a good idea to consult with a tax advisor beforehand.
> You also can make a capital contribution in the form of services. As with property, you will need to obtain a market value for the value of your services. There also are tax consequences, as you will have to treat this value as if it were actual income you earned for your services, meaning you will have to pay personal income taxes on the value of these services. Because of this, services are not as popular a form of capital contribution.
So, yes, you can "invoice for services rendered" (aka services capital contribution, apparently) but it'll be taxed as income. Therefore, you want to contribute property, and the tax consequences are left as an exercise to the reader.
Looks like I'll be completing that exercise, but perhaps not at 2:30am.
Cheers for the tips.
EDIT: Two more useful resources:
- https://www.law.cornell.edu/wex/contribution
> The capital contribution increases the owner or partner's equity interest in the entity. Capital contributions are not considered business income unless given in the form of a loan.
- https://ttlc.intuit.com/community/business-taxes/discussion/...
> For a Single Member LLC (that has not made an election to be taxed as a corporation), the IRS does not recognize the LLC exists (for most purposes). Therefore, you and the LLC are the same. Therefore, there really isn't such thing a Capital Contribution for tax purposes.
Apparently "It's complicated(TM)" is still the final answer, because single member LLCs can't have Capital Contributions. Hmm.
One reason I post openly about this sort of thing is precisely because people like yourself come out and correct my misunderstandings. So again, thank you! This is certainly a reminder that I have lots more reading to do.
When you have money in the Revolut account you can spend them in any country and it would be very difficult for some entity to block your funds.
Thanks for the hint about Revolut and Monese. Now I'm curious what their requirements are...
It made me realize how fragile our access to bank accounts and identity actually are.
I have as such setup a portion of my wealth in crypto-assets with a dead mans switch and recovery methods covering fire, amnesia, identity loss, or death, while ensuring the majority can't be seized by a government or rubber hose attack without the consent of myself and a quorum of people I trust around the world confident I am not under duress. As long as I have the freedom to communicate and some time I can recover.
The market value of crypto-assets may not be predictable, but I prefer to be able to count on never losing access to it, and having theft protections no bank can offer.
And what also is scary, if I had been a real target and not bycatch, I bet anyone who helped me would've also faced the same asset freeze for helping me.
Well you certainly can't do that with Bitcoin unless your landlord has a similarly anarchocapitalist worldview. You'd have to cash it out at an exchange and pay the individual in question. This choke point would leave you similarly locked out.
This applies to only a fringe minority of the participants in the Ponzi.
More sympathetically, even if this was a real problem that doesn't mean a Ponzi scheme is the way out. It's like saying you got burned in 2001 so decided to invest with Madoff knowing full well he was a Ponzi, but at least he wasn't a tech company.
Would it? The parent commenter was in the United States, and even in cities of about 1 million people, I've seen Bitcoin ATMs at chain supermarkets. Some were even integrated into the ubiquitous CoinStar machines at the front of the store.
Would it? People are willing to exchange USD for BTC. You can't control everything.
it should absolutely be a human right in this age.
However, I think we should be careful with drawing the conclusion that technology for circumventing our institutions' ability to regulate altogether is the natural solution, when perhaps fixing the institutions would lead to an overall better outcome. If we all moved to Bitcoin, then we would no longer have central democratic control over who is allowed to transact or not, and I don't think that leads to a better society.
Plus, anonymous physical cash transactions have been the status quo forever
Physical cash is de facto restricted in many places in the form of upper bounds on the amounts that one can withdraw and deposit.
Governments should stop crimes that may lead to transactions, not transactions.
The analogy would be free speech. It shouldn’t be illegal to write an article in support of terrorists even though becoming one might be.
It’s not a right we currently recognize but it’s a cogent argument.
You set up a scene of a refugee "storing their wealth in Bitcoin", but it begs the question: where are these refugees with substantial wealth they are looking to exfiltrate? Typical refugees are emigrating from locales where they were earning dollars per day. The use case of shielding hoarded wealth during a journey to a freer locale is a blinkered fantasy. (Of course, if this is incorrect, surely there are hundreds, at least dozens of compelling case studies by now?)
Again, these proposed use cases are absolute fantasies.
say i've happened to save 1000$ and i want to leave the country and i don't want the police near the airport to take my money as they're known to do. do you think it would be an absolute fantasy for me to find some way to sell my 1000$ for bitcoin and buy them again somewhere else?
A very privileged thing to say. Do you think there are not wealthy people trying to escape the Wests' wars?
> It costs many thousands of dollars to cross borders illegally by the way, so you’re likely to exhaust your savings trying to escape whatever you’re running from.
...and worse, often end up in debt along the way. Where is the room in that common situation for the need for exfiltrating funds via BTC?
African migrants trying to cross the US southern border, on the low end. Airfare from West Africa isn't cheap. In this article[1], one migrant says the trip had cost her $5,000. It takes some assets to pull that off, and some of that is probably kept on their person for the duration of the journey. A microSD card in a condom in a....sensitive location....is not likely to be detected if/when narco-smuggler cartels shake you down for cash.
At the high end....government kleptocrats fleeing Afghanistan. Supposedly President Ashraf Ghani and his family had to leave piles of cash because they couldn't carry it all when he boarded a helicopter.[2] Too bad they didn't convert to stablecoins and store them on a wallet on a thumb drive.
[1]https://www.reuters.com/article/us-usa-immigration-africa/u-...
[2]https://www.reuters.com/world/asia-pacific/russia-says-afgha...
It remains to be seen whether it would have been practical to move money from Syrian liras to Bitcoin. No one wants to buy hyper-inflating currency.
IMO, the not-classy thing is cryptocurrency advocates constantly trying to leverage the plight of refugees, the unbanked, and those living in locales with constrained economic freedom to underwrite the reputation of a set of technologies that are overwhelmingly used as pernicious speculative vehicles.
The average transaction fee during slow periods is about $5 and it jumps to $20 whenever there is load on the network.
And the lightning network is a poor solution to this because the LN requires a lot of capital to fund channels, something poor people explicitly don't have.
Finally, the fact that Bitcoin proponents have to point to poor authoritarian countries to find legitimate usecases is telling in and of itself. It's basically a blunt admission that the technology is mostly useless in the US.
When people say this, do they mean $5/$20 per bitcoin or per any transaction whatever size?
Transaction fees are per kb of data so more complex transactions pay more. The amount transfered is irrelevant.
It costs $5 to spend any amount of Bitcoin?
Is that for real? (I genuinely don't know, that just sounds so high)
In addition to that, there's always the Lightning Network as well wherein you can transact for fractions of pennies.
You should fund a LN channel for more than one transaction because you cannot change the channel funds after creation, so you better make sure enough is in it. This makes it unsuitable for things that require more than a tiny fraction of your monthly income, e.g. rent.
LN channels also need to be constantly monitored to not get scammed, which the LN whitepaper suggests you to pay third parties for.
The LN whitepaper completely obmits the routing problem, too. It more or less says "we don't want to think about that now". A network whitepaper that doesn't think about routing, imagine that.
Yes, that makes it a closed system, but it was never realistic to have every single person on earth access bitcoin via on-chain transactions.
If you don’t pay enough it can take hours for your coffee to be paid for.
So every time you buy a coffee with Bitcoin the transaction fee is different and sometimes will cost more than the coffee itself.
You are also going to paying exchange fees each way and those fees are likely to be quite large in authoritarian countries (as any illegal activity is generally more expensive).
The problem is that the Bitcoin fee is also payable on all domestic transfers too, which of course are free in traditional banking.
Gold has been used to store value for thousands of years, while Bitcoin is a new and experimental technology. It's absurd to say that you would use an experimental technology to store long-term wealth. Maybe once it's tried and proven, fine. But right now it's inefficient, volatile, has high fees, and has got the problem with mining I talked about above.
For clarity: My comments above are directly relevant to the comment above about inflation. Guarding against inflation is about holding onto your wealth for the long term. I was comparing Bitcoin to gold for that purpose -- which is entirely valid.
Nope, you're laboring under a misapprehension. Even if all new compute power stopped being manufactured miners will run their existing equipment. The mining difficulty will plateau and overtime gently decrease as equipment breaks.
Older and less efficient (at computing double SHA-256) equipment can be profitably brought online where the price of electricity to do so is available and other more valuable uses of that energy in that locale are not possible.
You can ride this all the way back down the years and generations of ASICs then GPUs to CPUs. Once humanity is out of CPUs, well, we'll have more pressing issues. We'll talk again then, or not.
Yes, mining and securing the network nevermind transmitting transactions would be difficult with ink, paper, and abacus technology alone. I'd expect gold to hold some value here despite difficulty in securing and assaying it restricting its useble value to technical specialists and institutions. Nonperishable food, water filters, consumable entertaining substances, etc. would be a better bet if you're prepping against a Mad Max level of collapse.
I guess it should be possible to trade bitcoin via the stellar network (according to their intro page[1], any currency can be), but I could well be wrong.
I got some given to me in the Keybase drop so I read up on them, but that's the limit of my knowledge in this area. I'd love to find a way to use them but articles like this talking about ponzi schemes etc tend to put me off bothering.
[1] https://www.stellar.org/learn/intro-to-stellar
You say that as though it makes it all but useless, despite the value it provides to people in those countries... that's very telling in itself.
But as I said there are many use cases, I just pointed out a few that I thought were most important on a global scale... because, you know, it's not all about people in wealthy developed nations.
But outside of those types of countries, and in countries like the US, the self-serving use case is a hedge against inflation. If inflation doesn't worry you, that's ok, but the recent money printing in trillions of dollars worries lots of other people. In 20 years I've seen the purchasing power of my money halved. I'm much happier to store my money in an asset that, so far, is seeing its purchasing power increase year on year.
From a technical standpoint the other use case, over the lightning network (and other layers and sidechains), is that it allows for instant micro-payments not possible with the legacy financial system. People are building products like podcast platforms which stream satoshis to content creators for every minute someone listens to their podcast. Others are building systems where every API call can be instantly billed. Or content distribution systems (think Bittorrent) where seeders can be compensated for service.
There are plenty of technical uses cases for a digital native money on the internet.
If you don't understand why it has utility I don't think there's anything more I can say to convince you. Sorry.
I don't trust politicians to manage their money or economy well. But I do trust code and math that enforces decentralised consensus that can't be manipulated by a handful of powerful people. Some have tried in Bitcoin's short 12 year history, and they've all failed.
You say Bitcoin is inefficient. In comparison to what? By what measures? If you compare Bitcoin to gold mining it uses less energy. https://cbeci.org/index/comparisons
If you compare it to the legacy financial system (and many other industries), it also uses less energy. https://bitcoinmagazine.com/business/bitcoin-energy-use-comp...
You say Bitcoin is volatile, but that is to be expected for a new form of money that people are still trying to figure out the value of. How long do you think it took for gold to reach a stable point of perceived value over its long history? Bitcoin is only 12 years old.
But perhaps calling it "volatile" isn't really even fair to begin with, when you compare it to top stocks and gold. https://ecoinometrics.substack.com/p/ecoinometrics-comparing...
Need for endless mining? Of course it's endless, it's a vital part of network security in an adversarial environment. As the network stores more value the energy expenditure will need to go up to secure it. This is true of any other store of value. Gold is not only incredibly expensive to mine, it's expensive to secure in large facilities.
The more Bitcoin integrates into the economy and the more wealth it secures, the more energy expenditure it should use. This is by design and a good thing. And if you compare it to other industries (linked above), it is far more efficient than current systems.
Forget "crypto". Most of them are varying degrees of scam or cargo-culting around "blockchain technology" (including Ethereum). Bitcoin is the only one that matters because it's truly neutral and decentralised. It wasn't founded by any company, there's no marketing team or CEO. It's just an open network protocol that people choose to opt-in to because they understand its value proposition to the world. In the same way that there's a separation of church and state, there needs to be a separation of money and state.
https://vijayboyapati.medium.com/the-bullish-case-for-bitcoi...
LOL, who in those countries would sell them bitcoin?
You've pulled out an argument I see all the time about the utility of bitcoin, but you can always just tell that it's made by someone who's never lived under an oppressive regime.
It's a first-worlders idea of what thirdworlders can do.
He works for the Human Rights Foundation and advocates Bitcoin for its humanitarian use cases. He has spoken to many people in these types of countries to get their take on it. See for yourself...
https://bitcoinmagazine.com/authors/alexgladstein
I mean, just ask the Chinese how easy it is to get bitcoin today. The billionaires, millionaires, and political elite can get their hands on bitcoin sure no matter where in the world they are, but not the common man (the actual oppressed in those regimes).
Unlike Alex, I don't have a conflict of interest.
Problem: Who is selling Bitcoin for local currency in an area where there is a problem which is generating refugees?
Sure - you can electronically send Bitcoin to people, but how is the seller going to receive local currency from a war torn region without being local themselves? And if they are local...why are they selling their Bitcoin?
Remember - this is an area presumably in some form of collapse. How is a refugee going to transact their savings to another party who can accept them safely in the first place (rather then say, just being robbed - presumably why they're fleeing).
With that said, each day that goes by I am more inclined to agree with him in relation to Bitcoin and all projects that tout "fixed supply", "store of value", PoW crap.
I agree that the unbanked and people that fear persecution or censorship can benefit from crypttocurrencies. The part where I don't agree anymore is these people have BTC as their best alternative to protect their wealth or to be sovereign over their finances.
Idiotic definition of a ponzi scheme crafted intentionally to include bitcoin, fails to include bitcoin, but does cover many valid economic activities.
I agree with you in spirit. Stocks that will never pay a dividend (if you can see the future) are worth $0. Most stocks are effectively speculative assets.
The difference is that a stock has a real, legal value: ownership of a company that has cashflows. If that company is liquidated, you have rights as a shareholder. You may also be able to vote on important decisions that the company makes.
Bitcoin is an asset that, by definition, never will pay a dividend. It is a stock that we know with certainty is worth $0. Its only value is speculative.
In that sense, Bitcoin is very much like fiat currency: its value is imaginary and based on how other people value it.
But if we're comparing Bitcoin and, say, USD, then Bitcoin is by far the worse currency because it's deflationary and unbelievably expensive to transact.
That's why, in places with unstable currencies, people mostly shelter their money in USD. If cryptocurrencies factor into it, it's because those currencies are seen as easier ways to transact USD. People who need their assets to be spendable on a daily basis don't hold them in Bitcoin.
You want currency you hold to be deflationary. Deflation is a systemic problem for economies, not individuals with cash in hand. Its not expensive to transact, it is extremely cheap. You go find a provider to let you accept payments from anyone in the world for a smaller % of the transaction and that will cover chargebacks. It doesn't exist, and you are not doing an honest analysis when you compare the transaction cost of walmart instead of yourself, or the cost of exchanging cash without the costs of moving people to the same location to exchange it.
You have no practical legal right to anything as a shareholder. If a company is liquidated the shareholders get nothing in practice. Management controls the finances and expenditures of a company, and a majority of shareholders control management. This control is usually only given to special classes of stock that is for the most part impossible to buy. Why do you think people fight over control of companies? Management routinely steal huge sums by allocating it for the direct benefit of some shareholders over others.
There are plenty of shitcoins out there that are purely pump and dumps, but it seems like BTC is here to stay.
https://www.gold.org/goldhub/data/gold-supply-and-demand-sta...
As of June 30, 2012, the $100 bill comprised 77% of all US currency in circulation. Federal Reserve data from 2017 showed that the number of $100 bills exceeded the number of $1 bills. However, a 2018 research paper by the Federal Reserve Bank of Chicago estimated that 80 percent of $100 bills were in other countries. Possible reasons included economic instability that affected other currencies, and use of the bills for criminal activities.
https://en.wikipedia.org/wiki/United_States_one-hundred-doll...
There's actually been far more industrial usage proportionally recently than any prior year. Prior to 2020, the highest industrial usage year was 2016, at ~7%. The article is wrong; the VAST majority of the demand for gold does indeed come from investors. This is ignoring gold's historical status, of course. Before the advent of modern computing, there was extraordinarily little "practical" use for gold beyond use as tooth fillings. And yet, it is during this time that gold was most coveted. Why is this? Economists have been debating that for a century! :o)
>Jewelry is its own category but it does have “utility” if viewed through the lens of human behavior across civilizations over time.
Jewelry does have utility yes, but gold jewelry has no marginal utility over, say, brass jewelry, other than the material composition. And yet, gold jewelry commands a far higher price, and despite even this, it is still in higher demand. This is because buyers place a premium on the metal itself, hence why I referred to it as a para-investment.
(B) is perhaps gold's most unique physical property, but given the historical prominence of silver (a metal that corrodes rather easily), I seriously doubt that this alone justifies a single ounce of gold historically having been worth an average person's months of wages.
(C) is true of many metals, and has only come into existence as a method for verifying gold in more recent years, which again belies its historical value.
Go to Coinbase and try to figure out how to use Bitcoin to buy something with. All they talk about is Bitcoin as an investment.
A currency can’t be an investment as the expectation that it will rise in value undermines the main quality of a currency, which is to maintain a stable value, so it can be used as intermediary.
Coinbase has a focus on trading. However, you can use bitcoin to buy things through Coinbase Commerce.
The idea that gold is useful as a store of value is ridiculous. You have painted the picture perfectly with your comment. It is not easily moved. It is not easily utilized. It is worthless to the average person and it’s price is heavily inflated.
After all, the eponymous scheme by Charles Ponzi was built on legitimate postal reply coupons.
So a list of non-monetary uses for gold is not evidence that its monetary uses are not Ponzis.
Most financial instruments are at least Ponzi-adjacent in that their value is derived from the expectation that other market participants will pay more for them than you did.
Whether it's real estate or equities, precious metals or cryptocurrency, profit requires an infinite cycle of growth that must collapse at some point.
https://coinmap.org/
Generally speaking, the people who provide the goods, use fiat for production of the good, and convert the crypto back into fiat to realize profits.
and that therefore, someone selling goods for cryptocoins, must, in addition to using cryptocoins, also use fiat currencies (because most of their business expenses can only be paid in fiat currencies).
And the system has revenues. Ethereum did around $35 million daily in fees this last week. Uniswap did around $3 million. https://cryptofees.info/
No doubt there's something to it.
Bitcoin is doing what, 100m transactions per year? Most of which are not for physical goods. Venmo, which started around the same time, does over 2 billion. M-Pesa, a "digital money" solution the same age does 15 billion. US credit transactions? 45 billion. Debit? 75 billion per year. And unlike Bitcoin, most of those are what people would call real transactions. Bitcoin's real use is a rounding error.
Cryptocurrency can be here to stay and also be driven by scams. Set up a Google News alert for "Ponzi scheme". Ponzi was active 100 years ago, but his approach is more popular than ever. As they say, there's a sucker born every minute.
Edit: Not sure why the downvotes, but this is a common phrase used to denote ponzi schemes.
After about a year, only about 0.3% of checkouts were done with crypto. Even manual bank transfer is used magnitudes more often.
Or is the author going to try to argue that txn fees don't count, and then Visa is also a Ponzi?
As long as you don't steal the electricity you need to pay for it in fiat. And you not only need electricity to mine new coins, but also for transactions
Ransomware creates demand in bitcoin and this demand keeps the value up.
"First, few if any gold investors have expectations of profits. They generally invest in gold as a hedge -- a "store of value" -- that they hope will retain its value in case other assets go sour."
Actually almost every other point he tries to make on things NOT a Ponzi could be made for Bitcoin too.