Specifically? Maybe not. If it were a Ponzi scheme I think all of that dark bitcoin supposedly held by "Satoshi" would have been converted to real money a long time ago.
But cryptocurrency and derived technologies like NFTs are for the most part scams in the general sense. The type of scam varies but the system is ideal for the unscrupulous to fleece the get rich quick, tech illiterates who think they are smarter than they really are.
But: Since "crypto" holds no intrinsic value, such as the backing of a states wealth, the actual material value of resources like gold, oil or coffee, or the structural value of a company (knowledge, employees, contracts), all its "value" is dependent on what other people are willing to pay for it, and the money these people have pumped into the system.
To put this in simplest terms: Every cent someone makes from whatevercoin, has to be put into the system by someone else. A house appreciates in value since living space is a scarce commodity facing growing demand...it's sarcity and thus its appreciation in value is a natural process caused by usefulness and demand.
The scarcity of blorkchain "currencies" however, is artificial, and they have no other use than as a token of value for something of actual worth.
It provides a mechanism to transfer balances securely from wallet A to Wallet B and it’s popularity and thus acceptance continues to increase, so it’s unfair to say there is no value inherent to it.
I can securely transfer monetary assets from one bank account to another as well, and be sure that said assets won't lose a lot of their value overnight because of some tweet.
That's exactly what people are doing almost everytime they order something online from a company not in their country of residence. And the system used to do most of these transactions (credit cards) works so well, it handles about 1,000,000,000 transactions per day without breaking a sweat.
>To put this in simplest terms: Every cent someone makes from whatevercoin, has to be put into the system by someone else. A house appreciates in value since living space is a scarce commodity facing growing demand...it's sarcity and thus its appreciation in value is a natural process caused by usefulness and demand.
You just fell over your own point there. Both houses and bitcoins go up in price if the demand for them goes up or the supply of them goes down... calling demand 'put into the system' when you disapprove changes nothing.
Also there are plenty of people who use houses as 'tokens of value' only to flip them when the market is favorable, and there are plenty of people who use crypto as a functional currency when other options are unfavorable to their circumstance.
A house has intrinsic value. People can live in a house, store things there, or rent it out. Its value was not put into the system, it simply exists, period. Even if the market crashes, a house is still useful and can appreciate again. Its market-value is dependent on both demand and usefulness. The second variable doesn't change.
Blorkchain "currencies" have no intrinsic value, because they have no other use than as tokens. Their market-value depends entirely on the market, entirely on the money pumped into the system.
In a way, blorkchain coins are a bit like overvalued stocks, the difference is, there is not even a company behind it, there is only the market evaluation.
>A house has intrinsic value. People can live in a house, store things there, or rent it out. Its value was not put into the system, it simply exists, period. Even if the market crashes, a house is still useful and can appreciate again. Its market-value is dependent on both demand and usefulness. The second variable doesn't change.
Let me answer that by showing you a mirror perspective of your point;
Crypto has intrinsic value. People can use Crypto to exchange or store value bypassing dangerous intermediaries and structures of control. Its value was not put into the system, it simply exists, period. even if the housing market crashes, a crypto currency will still be useful and can appreciate. Cryptos market-value is dependent on both demand and usefulness. The second variable doesn't change.
Now the point here is that the mirror argument is about as right as yours. You can imagine ways crypto will devalue, i can imagine ways your house will devalue. You can imagine using your devalued house for things that are useful to you, i can imagine using a devalued crypto currency for things that are useful to me.
> i can imagine using a devalued crypto currency for things that are useful to me.
What are examples of these things?
Something which has no use other than as a token of value, once devalued, can no longer be used to exchange value. Sure, one could still transfer 100000000 whatevercoins to whoever after they are devalued, but what's the point if there is no value to them any more?
> People can use Crypto to exchange or store value bypassing dangerous intermediaries and structures of control.
EUR, USD and CNY wont suddenly lose a lot of their value overnight. They are tokens of value as well, with no use other that to exchange value between people. In that regard, they are similar to blorkchain "currencies". The difference lies in exactly these structures of control. They are regulated, and powerful actors (states) have an interest in their stability.
"Artificiality" is poorly defined and not clearly linked to being 'bad' in any way.
Scarcity in blockchains is not, let's say trivial, since you haven't described how being artificial is a detriment. If the Bitcoin Core developers, the exchanges, and all the largest whales all collaborated to increase the supply of Bitcoin in their interest, they would fail lest they somehow convinced everyone who puts value in the network (many put value in for the reason that the supply will likely never change) that the supply should change.
You should do a bit more research on how blockchains work and where there security comes from.
fiat currencies aren't back by government wealth, they're "backed" by people's trust in the future stability of the currency. people trust that the value of the currency will remain relatively constant over shortish time horizons
this "value" is also arguably "artifical" bc it is also derived from nebulous concepts like "trust"
I personally think deriding something bc it's source of value it's what I like is a fruitless exercise
This particular article is exceptionally weak and fails to address substantially all of the criticisms levied by Stolfi (which is what this is really in response to). [1]
It spends a lot of the time discussing the SEC's "warning signs" / red flags that something may be a Ponzi scheme which are symptoms and not causes. Just how a traditional Ponzi scheme may manifest within the context of traditional markets like 'issues with paperwork.' Nobody is going to claim that you need to have 'issues with paperwork' to be a Ponzi scheme.
Bitcoin is best thought of an a distributed or unbundled take on a Ponzi scheme where instead of having a single centralized authority run the whole show, various parties all collude directly or via incentive structure to achieve the same fundamental results.
> Investment Returns: Not Promised
They 100% are - by every single shillfluencer account on Twitter, on Reddit, on TikTok and yeah, even here from time to time. I've been NGMI'd here at least several hundred times.
> Open Source: The Opposite of Secrecy
Everyone agrees the chain is transparent. However, that's the kind of transparency that doesn't matter at all in this context.
What makes it a Ponzi scheme isn't that 1BTC=1BTC, it's that you have shady Inspector Gadget themed Bahamian shadow banks printing un-backed ersatz dollars and pushing the price up to create the illusion of gains. You have exchange "outages" as soon as the price starts dropping - but only when it starts dropping. You have spoof orders, wash trading, tape painting - every trick in the book - to make people think they've gained when in reality, they have not.
> No Pre-Mine
Yeah, all that means is it's not a security under Howey.
> Leaderless Growth
Yes, it's an old scheme with a fresh coat of paint.
> Section Summary: Clearly Not a Ponzi Scheme
Agree to disagree. I'm with Stolfi on this one.
1. It is sold as an investment, with some mysticism around how exactly it is appreciating in value.
2. All gains paid out to previous participants come from new participants.
3. Entities (miners, exchanges) are constantly extracting welfare for self-enrichment creating a negative sum coefficient.
Gold is a commodity with intrinsic value. It is an input into electronics manufacturing - in fact, you'd have a hard time making Bitcoin miners without it. It's also shiny and people like it, which adds to the demand. Folks are speculating on future commodity value. I don't think it's a good investment, but that's just me.
> Pokemon Cards, Stamps?
No, those are unique non-fungible items. Much closer to NFTs than BTC. There is no central entity extracting value by increasing the supply of these items, as each item is unique or at least fixed in supply.
Gold is not traded on its commodity value. Its been traded for thousands of years because it is durable and difficult to produce. People who believe in Bitcoin compromised some sheen to make those two most important attributes tenfold more potent.
> Its been traded for thousands of years because it is durable and difficult to produce. People who believe in Bitcoin compromised some sheen to make those two most important attributes tenfold more potent.
No, you do not understand. Bitcoin simply is more durable and difficult to produce than gold. If that's not what you value then fair enough, but don't go around stating your opinion as fact unless you want to be guilty of what you accuse others of doing.
But the security of the network does have to do with the price - directly. Its not something you brought up so I didn't mention it, but now that you resort to it you should know the ABC's of Bitcoin: price is proportional to network security. I'm glad I could argue you down all the way to learn the basics.
What it is is the manifestation of the Greater Fool theory. The only reason you buy it is because of the expectation that some fool greater than yourself will pay an even higher price that you.
And if BTC is that, then NFTs are the Greater Fool theory to the second power.
It is really amusing, and a little sad, how desperate people are to "prove" to everyone how amazing this technology is. It's definitely totally not related at all to how much money anyone has at stake, and how much people stand to lose when it fails.
If you look through the history of amazing scientific breakthroughs, I suspect you'll find that the ones that legitimately changed the world didn't require armies of self-proclaimed experts to explain to everyone what the benefit is and what problems it solves. However, when you look through the history of snake oil, boom-and-bust market crashes, and actual Ponzi schemes, that's exactly what you find.
If you want to convince people of cryptocurrencies merit, just go solve some real problems that real people have. The fact that cryptocurrency has been around for so long and no use-case has materialized outside of pump-and-dump get-rich-quick schemes tells you everything you need to know.
Too many people are in the value chain at this point - chips manufacturers, electricity generators, programmers, VCs [a16z most active], charlatans, influencers, your neighbors.
I don't know where it goes from here - its almost too late for it to prove any real world value. Also note that as equity assets tank so do crypto currencies - that strong correlation reflects how the Feds monetary policy has unfortunately inflated crypto. Wouldn't it be ironic if that was how Bitcoin actually did become a reserve currency (it won't because it doesn't behave like one and have underlying value similar to USD).
It is precisely this kind of ignorance this article is to disperse. Just because you don’t have the imagination to see why peer to peer, censorship resistant, non-state based electronic money might be useful, doesn’t mean we all feel that way. After all these years and you still don’t get it means you live a sheltered life. In fact, you are going out of your way to shout “scam”, meanwhile most of us just ignore you while building the future.
There it is, the comment that uncritically defends cryptocurrencies.
I mean the traits you describe are not wrong, it's just that crypto is not useful as a payment method due to transaction volume, value / exchange rate volatility, acceptance, etc.
For a laugh, people bought pizzas and the like with bitcoin. Nowadays they hold onto it because it might be worth fiat money. Why spend something as money if it could be worth 20% more tomorrow?
It's an unregulated trading product, it's not practical as electronic money. I mean it might become that, but it would need a lot more oversight, which will cost the traits you mentioned (peer to peer, censorship resistant, etc).
It’s fine, Bitcoin has worked exactly as expected for the 13 years of its life. It will work as expected for the next 13. It doesn’t need your approval, it just is. The next 13 years might well be considerably more interesting than the first. You are welcome to throw rocks from the side lines. It is an entirely opt-in and voluntary monetary system.
It's not money if all you do is hold it lol. That makes it an asset. Spending it in exchange for goods and services makes it money, and 4 tx/sec doesn't give you a lot of room to do that. And uh, well, you see, many other assets have outperformed it over the last 5 years.
You're right, they wouldn't refer to it as money because that would undermine the power of their own printed fiat currency.
So its just some sort of very expensive commodity asset, which is used to store value, which we can expect to use to trade with other people, which USED to be money but somehow isn't anymore.
I didn't know that the silver and gold minted coins traded by Roman merchants were in fact not money, but commodities. There's just so much utility in carrying around sacks of metal shards.
> I didn't know that the silver and gold minted coins traded by Roman merchants were in fact not money, but commodities.
It was money in Roman times. Luckily we have moved on. It is no longer money, unless you're planning on trading with Marcus Aurelius. Gold was demonetized in the 30s.
Oh, so only the government definition of money is whats relevant here, and only of the last ~100 years. Historical and physical contexts of money are irrelevant.
Its interesting because you were even brave enough to includ "coin" in your definition. Coins are made of rare earth metal blends, like silver, copper, nickel, and gold.
So metals are only money when its in a small circular token form factor, but not when its melted together into a heavier bar. Got it.
> Coins are made of rare earth metal blends, like silver, copper, nickel, and gold.
Those are not rare earth metals. They are metals, but not rare earth metals. Those are "any of a group of chemically similar metallic elements comprising the lanthanide series and (usually) scandium and yttrium. They are not especially rare, but they tend to occur together in nature and are difficult to separate from one another."
Also, nickel isn't rare by any definition. Nickel is the fifth most abundant element on Earth.
> So metals are only money when its in a small circular token form factor, but not when its melted together into a heavier bar. Got it.
No, that's also wrong. "The characteristics of money are durability, portability, divisibility, uniformity, limited supply, and acceptability."
Gold fails the acceptability test because to be money, something must be broadly accepted as a medium of exchange. It is not accepted by anyone. Walk into a Walmart with a brick of gold and they'll tell you to get stuffed. You'll get the same response at Home Depot or if you try and email Amazon. That's why it's not money.
> Oh, so only the government definition of money is whats relevant here, and only of the last ~100 years. Historical and physical contexts of money are irrelevant.
They're relevant in antiquity. Not so relevant today. Like a hitching post. What matters isn't even the government definition but rather the social definition.
In prison, a prisoner may trade packs of cigarettes and ramen noodles for favours. Those "commodities" to us on the outside, become "currency" to them, a medium of exchange; money.
So while it seems strange to refer to ramen noodles as money in some contexts, and especially from the outside, the economic behavioural context allows us to attribute monetary function to this commodity, and allows us to say it is being used as a money.
When I'm talking about crypto/bitcoin/money, I am using a global trade and historical context, the macro concept of money outside of any single government, currency, or system. I am using money in an economic behavioural concept; something people use to trade and save with.
I understand you're not willing to accept or trade with Bitcoin, which is why it is not money to you.
But there are those that do accept it, and every year the numbers grow. Thus it is already money, and it is only a matter of time before it becomes de facto "money"
Mackerel may be money in prison but we’re not in prison are we? It’s broadly accepted there which is why in the context it is money. Gold is not accepted anywhere broadly and therefore not money anywhere.
If you need short term value stability, don't use Bitcoin, because anything rapidly scaling is inherently volatile and unpredictable. This can partially be attributed to Bitcoin's protocol (block halving), but mostly due to human speculative behaviours. Block halving is relatively dramatic in the short run, but much less so after more halvings have passed, simply as a matter of math.
If you need long term value storage, use Bitcoin.
Price volatility is a result of trading volume and short term human behaviour. If you have enough imagination, predict what happens to volatility if mass adoption occurs.
> For a laugh, people bought pizzas and the like with bitcoin. Nowadays they hold onto it because it might be worth fiat money. Why spend something as money if it could be worth 20% more tomorrow?
Which is kind of the definition of a deflationary currency.
We've been through all of this already with the gold standard: it was useful for a time, but the pros and cons have generally been weighed and the consensus seems to be not to use it.
Just because you don’t have the imagination to see why peer to peer, censorship resistant, non-state based electronic money might be harmful, doesn’t mean we all feel that way.
Bitcoin is an attack on the core foundations of our society and is trying to actively undermine democracy. Thankfully it's pretty ineffective so far.
The justification is in the parent post. By removing control of money from the democratically elected state, you are creating a corporatist dystopia where only money itself is the highest power and the will of the people no longer has a way of being enforced.
I'm a big beginner believer in Kreiskyan deficit spending for example. Good luck trying to do that once you can no longer print your own money.
In most of the west, capital already has the highest power. Unfortunate, but folks seem ok with it. I’m a big believer in sound money and sound fiscal policy.
Deficit spending is stealing from the future. Bitcoin is sound money, hard money. You can’t steal from your children to pay your bills today.
I strongly disagree with your views on "sound money" and fiscal policy.
If you look at what Bruno Kreisky did, you'll see that he didn't "steal from" the future, he invested for it. He basically built the modern Austria I know and love.
I also think the whole "stealing from the future" talking point is BS - to paraphrase Keynes, in the future we'll all be dead :-).
But it's okay for us to disagree here. In a democracy, we can just vote for somebody that represents our views. If either of us can convince the majority to see things our way, we'll get our way.
Now if we had an inflexible monetary system like the one you're proposing, even if the vast majority voted to do things my way, we couldn't anymore, because we robbed the democratically elected state of its power.
This is what I mean when I say Bitcoin is antidemocratic. It entrenches your ideology on a technological level and removes all democratic control.
And that’s a Good thing. As Satoshi said before releasing 0.1 “The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.”
You don’t want people messing with the money. You can’t trust people and you certainly can’t trust the Keynesians. Taking this power away from the abusers gives power BACK to the people.
That's just more of you projecting your ideology. Fact is, you are trying to force your ideology on the world in an authoritarian manner and remove democratic choice.
You might not agree with my view, but to try to suppress it is antidemocratic.
> You don’t want people messing with the money.
You don’t want people messing with the money. I do. You're trying to remove my democratic right to elect somebody who will do what I want.
I don't care what Satoshi said - he's not some all-knowing saintlike figure. I want the central bank to be able to debase currency. I don't believe in the same things as you and you are attacking my democratic right to see my values reflected in society.
> Taking this power away from the abusers gives power BACK to the people
If you define "the people" as "everyone that agrees with you", sure. But that's an awfully authoritarian thing to do, isn't it?
Hang on there. This is always been about voluntary involvement. You are completely free to ignore cryptocurrency. There is no coercion at all.
Nobody is trying to suppress anything. You are free to believe, transact or vote for whomever you like. There is no loss of democratic choice. The ideology is completely voluntary.
The good thing about the parallel economies is we can both have it. You can have your rapidly inflating made up Euro, manipulated by your elected and unelected politicians and Bitcoiners can divide everything of value on the planet by 21M BTC. Thing is, as the fiat gets worse and worse, more people will choose to save in things like Bitcoin. Are you familiar with Gresham’s Law?
You are trying to word this like folks are pushing this on you. Nothing is further from the case. Opt-in.
I’m not defining the people as anything. Everyone is free to believe whatever they wish.
By creating a shadow currency you are undermining the one we democratically agreed on.
Your opt-in is actively harmful to democratic society.
You're saying "don't worry, you don't need to break the social contract, but we will and we'll make it easy for others to do so, too. And if our sabotage makes everything collapse, well I guess that proves we were right all along. wink"
This is quite inconsistent. so the emperor has no clothes. If fiat cannot survive in the presence of cryptocurrency, it is not cryptocurrency that is sabotaging anything. Either it can exist with it, or it will die by its own death. The irony of course is that I have been saying cryptocurrency is voluntary; and you have been saying fiat only is mandatory.
> If a building cannot survive in the presence of people setting up explosions at its base, it is not the terrorists that are sabotaging anything. Either it can exist with it, or it will die by its own death. The irony of course is that I have been saying terrorism is voluntary; and you have been saying wanting to live in peace is mandatory.
Dude, I think you might be a little obsessed with violence. We are talking about open source software. I have no idea where you are going with this.
Chill out. Let the nerds have their math money and live and let live.
The only worse thing than having people that might practice bad monetary policy having power over the currency is having bad monetary policy immutably baked into the structure of the currency.
Nope, I just use this account when I talk about Bitcoin. I don't walk down the street advertising how much money I have in my pockets; likewise, I keep the fact that I own Bitcoin private.
I find it annoying too, but some of it is a rightfully acquired allergy. Crypto maximalists tend to outright brush off the hard problems an inherently valueless, pseudonymous, electronic currency brings to the table:
- Its failures at being a store and measure of value (wild and arational daily value swings) and medium of exchange (long confirm times)
- Real life environmental impacts (overblown, yes, but still glossed over)
- Criminal enablement (there's a reason most forms of ransomware use crypto)
- Scams everywhere
- Knock-on effects on the real world (tried to buy a GPU lately?)
- OPSEC issues (it's a lot harder to secure a crypto wallet than a credit card)
I don't think they are brushing off hard problems. The problem is that:
1. Some of those problems are being solved.
2. Some of those problems exist in other socially-accepted technologies and we've learned to deal with it.
3. People have trouble thinking abstractly and don't think deeply enough about their criticisms.
I'll briefly try to address your points:
- Stablecoins are going to be the answer here. In the future I think people will take out micro-loans in stablecoins with their bitcoin/ethereum/etc as collateral. Daily purchases will be in stablecoins. Confirmation times are actively being worked on, namely single-slot finality in ethereum.
- This is being worked on. Ethereum is actively testing their new proof-of-stake algorithm as we speak with the goal of a full release in the next 3-6 months. Bitcoin is another story but I think it's a mistake to lump all cryptocurrencies together.
- Criminal enablement. This exists but is vastly overblown. It turns out that transactions being public is risky for criminals.
- Email has phishing scams. Phones have scams. Internet popups have scams. Any open technology is going to have scams. I suspect this will improve as we develop a social framework to educate people. How many times have you hear warnings about phishing? We can do the same with crypto.
- This is being worked on. You don't need a GPU for proof-of-stake.
- This is being worked on via UX and technology. Smart wallets for example allow people to recover their funds if they lose their keys.
Remember that the GP was about Bitcoin, not crypto as a concept. Most of the 'being worked ons' there don't apply, and in many cases, the community is hostile to things that may solve the problems (e.g. the debate/debacle around the block size limit) for selfish reasons.
Ether's ecosystem is a lot more promising, but still has a ton of rockiness. More specifically, I'm not confident in the core usability problems being UX implementation details. People don't want to have to think this much when making mundane purchases.
Also, I'd argue just being as good as the existing systems is mere table stakes. It needs to be better (outside of being a speculation vehicle). That is one I truly don't see happening. The anonymity/uncensorability benefits are questionable, the valuation problem appears to rely exclusively on fickle market whims or corrupt centralized entities, lack of refundability is an anti-feature for the mass market (and only solvable with centralized middlemen, which obviates half the reason to be using a crypto in the first place!)
That's exactly it. Even if it's not a ponzi scheme, it's still entirely dependent on trust; if that trust collapses (and it will), its real money value will tank.
The advocates will of course mention that fiat money and stocks also depend on trust, but both of those have very powerful organizations presiding over them who ensure that the value of e.g. the dollar will not crash overnight, or that you will be compensated if your account gets plundered, or who will pause trading on a stock (or the market as a whole) if people start panicking and acting irrationally. Decentralized products (whether you consider cryptocurrencies money or assets) do not have these securities and guarantees. Individual players like exchanges might, but if one exchange decides to pause trading, the others will gladly take over that business.
- How are you verifying the contents and beneficial ownership of exchange wallets?
- How are you verifying market activity is legitimate, and there's no wash trading, spoofing or tape painting?
The underlying L1 is so utterly incapable that entire centralized, trusted and opaque businesses have to be built on top of and around it - offering none of the guarantees of the underlying - just to get past the fact it can't actually support more transactions than a mid-sized Costco.
Because that's what determines how much you can exchange each BTC for - not necessarily in USD but in terms of goods. Those are substantially they only things that determine how much each BTC is worth. You have to trust they don't unravel or your net worth will be substantially impacted.
Nah… tether is less relevant today than ever. Maybe in 2017/2018 it was another story. I suspect in 2022 the other stables will overshoot it anyway. Folks seem quite excited about UST as another algorithmic option today. We are still in price discovery phase for BTC, and will be for a while longer. There are 1.3M coins available for purchase today, dropping at about 100k/month. I feel this will have a far greater effect than some stablecoins.
I feel nothing for wild swings to my net worth. If anything, it has made the very concept of money more nebulous to me.
Yeah, no, but I do wish you luck with that. [1] USDT is 50% more volume than BTC and ETH combined. It's all the liquidity in the entire market. It's more important now than ever.
Nah, I don’t feel I need to verify any of those. I buy the coins and get them off the exchange. I don’t touch tether. Why would I care what games people are playing on the exchange, as long as I get my coin at the market price, I don’t care. I am talking about not trusting (eg: relying on a fixed source of with no verification, eg: trust anchor. A ‘root CA’ is a good example of a trust anchor. BTC does not have this at all.) Verify the block. Verify the tx. Verify the sig. that is all.
The financial system also has a saying: The markets can remain irrational longer than you can remain solvent.
The verification you refer to prevents double spending. It does not prevent insane valuation swings due to sentiment, government action, etc. That makes it a worse store of value than most fiat currencies.
This represents a serious misunderstanding of fiat currencies. Fiat currencies are fully backed when issued. When you take out a loan, the bank creates money, hands it to you, and creates a negative entry on their balance sheet. Once you repay your loan, that money evaporates. However, that money when in circulation is backed by the demand for repayment of the loan itself.
A fiat currency will only collapse if you lose faith in the state, your fellow humans and the ability of the judicial system to enforce repayment.
Once that happens you have much bigger problems. Like Mad Max style problems.
People have been afraid of that forever, and yet here we are. It's an issue in poorly managed economies, but of course even in poorly managed economies, you can buy things with it to persist value.
You can substantially only buy drugs directly for Bitcoin - still, to this day. Otherwise you have to exchange it for dollars, the things humans use for payments. This can be done via transparent gateway like Bitpay, but directly exchanging Bitcoin for legal goods and services is still not something you can do. Not least because 4tx/sec wouldn't even service a mid-sized Costco.
My goodness Arctic, I don’t think those 2015 era talking points apply anymore. DNMs take monero. Bitcoin, you can buy many many things. And you mention the 4tx/sec thing, you know that payment channels were invented many years ago and are used by WHOLE COUNTRIES today right? We can argue over and over again. The world is changing, moving. We have lost faith in the system. We made our own system.
You can buy goods from Amazon with crypto without even having an Amazon account.[0] You are coming off as a motivated detractor, but I don’t find your points timely. They are like 10 years out of date. Crypto works for many real world use cases. You may not know this or agree, but it’s the lived reality of others in this thread.
> And you mention the 4tx/sec thing, you know that payment channels were invented many years ago and are used by WHOLE COUNTRIES today right?
Really? Name a single one lol. Chivo is a MySQL store. And a garbage one at that. They only use Lightning to transfer value internationally between their own two accounts that they could do instead with an addition and a paired subtraction. Nobody uses Lightning. Nobody's ever used Lightning. Not to mention all the liquidity is provided by 3 centralized entities. [1]
I don't think Monero actually offers the level of security that most folks think it does, and Hydra still uses BTC no?
I did forget to mention ransomware payments, so thank you.
Chivo is one wallet. Agree it’s not great but El Salvador vendors hav implemented Point of Sale Lightning Network. It is an open system and you can use one of many mobile LN wallets. Chivo is probably the weakest. You will find that McDonalds, Starbucks, the local fruit vendor on the street can process an open LN tx. No sweat. “Nobody uses it”. Yeah ok. Those graphs indicate non zero channel balances and nodes.
Monero still has the 650k bounty on tx de anonymization. If you have a way, feel free to claim it.
Nothing you've said really counters anything I've said lol.
> “Nobody uses it”. Yeah ok. Those graphs indicate non zero channel balances and nodes.
I didn't see a country come on line in the charts. I see twice as many people using it as 3 years ago and virtually zero increase in usage post-El Salvador.
At the end of the day it's boat anchored to a worthless L1 which would require 75 years and ~1/3 of a trillion dollars to open a channel for everyone on earth.
You see channels, not users. You see locked funds, not txs.
I don’t think you know how this works at all.
I think you are being willfully ignorant about this.
You said no country uses it: and I said yes they do. You said chivo sucks, I said yeah, but you can use any LN wallet.
I don’t know what more I can say. You are living in the past man, making excuses for the Fed and the State. Things have moved on, and I feel like you will be screaming as more nations adopt this.
El Salvador is mining BTC from geothermal power from Volcanos.
Ok, but so what? Why do you think Bitcoin would protect you? Why wouldn't you purchase assets of any sort with money as you receive it? That's the whole point of inflation - to incentivize the purchase of productive assets.
Anything could happen at any time. But I don't live my life with a pile of weapons, canned peaches and ammo. That's prepper talk.
We have no idea what a hypothetical apocalyptic failed state America looks like. There's no guarantees that there won't be a single entity with more than 50% of the hash power. There's no guarantee that the internet will be up. There's so many things that have to go exactly right to think we'll be trading spreadsheet cells in the apocalypse.
> And look where that got us: the federal reserve printed trillions of dollars in 2020 to prop up the stock market.
They didn't print money to prop up the stock market, first of all, that was a side-effect.
A massive shock to the economy - remember COVID? - caused people to go home and stop working - to save money instead of spending it - and broke down supply chains. Without intervention this would have led to a deflationary spiral where merchants tried to lower the prices to incentivize spending, but of course this would mean they had less money to pay employees, which in turn meant employees couldn't afford goods - and so on. [1] All of the worst periods in world history were deflationary.
So the money supply was increased via QE swaps (which by the way, just swap assets on the books at banks with reserves to collateralize loans) and lower interest rates. This allowed folks to go back to work and allowed the economy to resume functioning.
Money isn't printed and handed out. Money enters the system via lending. All the money that was created will blink out of existence as the loans it was issued against are repaid. The Fed can reduce the supply if the supply itself is causing prices to go up - but it is not. The Fed has the tools to reduce supply just as it has the tools to increase the supply.
A lot of excess liquidity went into assets, but as interest rates go up, it'll come right back out and blink out of existence. So what?
The Federal Reserve literally saved the economy.
Explain to me how this is bad in any way?
This feels a lot like people complaining bitterly about the 2008 bailouts - which by the way were loans not grants, and have been repaid netting the US government over $100B in profits. [2]
> If you look through the history of amazing scientific breakthroughs, I suspect you'll find that the ones that legitimately changed the world didn't require armies of self-proclaimed experts to explain to everyone what the benefit is and what problems it solves. However, when you look through the history of snake oil, boom-and-bust market crashes, and actual Ponzi schemes, that's exactly what you find.
Funny how you carefully avoided making any solid points here. Let's assume what we all know you're saying - Bitcoin, if it was legitimate, would not require shills in order to be successful. Since Bitcoin is fully capable of securing $1 trillion dollars worth of value (unhackable despite the massive prize) I would say its had some success. Are there many shills around for Bitcoin today? Yes. What does that have to do with its success or value?
Even further obliterating the point you were too scared to make directly: the initial momentum which got Bitcoin started and gave the protocol its security which gave it that aforementioned success in security was grassroots and based in technological and academic interest. This is very clearly spelled in the blog post. Did you read the content before forming your thoughts about it? You might as well have not. Embarrassing.
I can imagine a scientific breakthrough that does require some nontrivial amount of explaining to the layman to prove that it's more than a scam.
This definitely isn't it.
The big problem with cryptocurrencies is that most of their promised "benefits" are actually detriments to people who are not anarchocapitalists (or close to it).
We don't want government control of money to be "disrupted", because governments are actually, in principle, accountable to us. The fact that there are certain prominent governments that have become corrupted by big money in practice is not even close to a good justification for tossing the whole "democracy experiment" out the window and replacing it with something that in principle does not answer to regular people in any way, shape, or form, and is very likely in practice to be ruled by those with big money from the outset.
We have about 80% of a working system already in place. What we need to do is fix the broken 20%, not have the absolute hubris to think that because we're The Smartest Guys In The Room, we can build a better, fairer, system that's built on the pure beauty of unfettered technology.
IDK, it seems to me that it took an army of self-proclaimed experts to proclaim the benefits of getting off of the gold standard. Fiat money as it exists today is the result of a process that isn't entirely dissimilar to what is happening with Bitcoin.
I don't think the mere presence of a lot of internet arguers is particularly strong evidence of anything, tbh.
One thing I've never understood about crypto is: once the token has completely penetrated society and become the de facto actual currency, doesn't the growth decay? At that point, what's the value in holding that token vs redirecting liquidity to a new token?
A common argument I hear from crypto folks is that government-backed currencies are susceptible to hyperinflation, as if cryptocurrencies aren't. But I don't see how this is the case. Once the growth stops, what is stopping everyone from pulling out?
They aren't vulnerable in the same way, at least. With nearly every cryptocurrency (with exceptions like Dogecoin), new units of currency enter circulation in a predictable and ultimately, limited way. Vitalik can't conjure a million ethereum out of thin air tomorrow, but any government can spend a ton of money and attempt to cover their costs with newly printed currency.
Basically, you're trusting the market to not debase your currency instead of a single issuer.
> One thing I've never understood about crypto is: once the token has completely penetrated society and become the de facto actual currency, doesn't the growth decay? At that point, what's the value in holding that token vs redirecting liquidity to a new token?
I thought that was sort of the point, that crypto wasn't really meant to be an investment class, but more of a stable store of value like a currency. The mix-in at present is it's not a de-facto currency, so the price is highly volatile due to people treating it as an investment, speculating, gambling, etc.
And then the conflict to be wary of, or the question always in the back of my mind when looking at the promoters, is there own investments do better when they sell others on the same investment.
> A common argument I hear from crypto folks is that government-backed currencies are susceptible to hyperinflation, as if cryptocurrencies aren't.
Sufficiently large, they are not. What made you think they were?
Assuming you have a de facto currency which is non-inflationary, the value in holding it rather than redirecting liquidity to another asset class is that holding it is the least risky option. The reason money was directed in to the non-inflationary asset in the first place was that the de facto currency was actively devaluing itself through inflation.
The larger concerns of a currency which cannot inflate are the economic problems which can come along with such stiffness - keyword: "deflationary crash."
The commonality with the Ponzi Scheme is that returns are solely based on others continued investment and that the value collapses if they stop doing this continuously.
That we managed to make this happen without a central entity that can run off with the money, with lots of people invested in the middle of the pyramid (the author, presumably) also doing the evalgalizing makes it technically different, but not practically. Collapse is always coming, to various degrees of severity.
If not to Bitcoin at one time, then to the planet. And GPU availability.
> The commonality with the Ponzi Scheme is that returns are solely based on others continued investment and that the value collapses if they stop doing this continuously.
And before anyone tries to make a stock market comparison: No, this isn’t the same as stocks.
Stocks are, literally, partial ownership of a company. A shareholder owns part of the underlying company, including everything from their bank balances to their brand.
Bitcoin would be like subtracting out all of the valuable parts of a company and leaving nothing but the shares behind. You get an entry in a database (the blockchain) and nothinf else. Literally the only thing that gives this database entry any value is the ability to convince someone else to give you money in exchange for it.
So common stocks do not have any claims on the bank balances of a company. I'm not defending crypto but your assertion is not wholly correct. Ostensibly you are the very last in line of creditors to claim any assets if the company goes bankrupt but you will get very little to nothing .. pennies on the dollar if anything.
Stocks give you voting rights at the AGM and a claim on future profits through stock appreciation or dividends if the company decides to issue dividends.
Common units _do_ have a claim on the bank balance of a company in the case it winds up. It’s just that employees, bond holders and preference share holders get paid first.
Any kind of money only has value if there is willing social acceptance for that money, aka, people who want it. That's the point of money.
Its value comes from being in a secure, immutable database, accessible from any point on the planet with an internet connection, censorship resistant, and more private.
The S&P 500 paid out something like $0.8T in dividends last year, profits from the economically productive activities of the companies to which shareholders had a claim.
> The commonality with the Ponzi Scheme is that returns are solely based on others continued investment and that the value collapses if they stop doing this continuously.
You could say that about lots of investments:
* art
* non-voting stock shares
* coins/stamps
* etc.
Anything with limited/finite supply can increase in value provided there is demand.
Who’s to say that someone’s enjoyment of a piece of modern art is somehow more real or valuable than someone’s enjoyment of holding Bitcoin?
Bitcoin also has some utility as a transaction medium.
The debate is wether or not it’s a smart investment, but as far as investments go it’s characteristics are not unlike many other forms that have provided sustained returns for decades, centuries or more.
No. Share value isn't determined by voting rights alone. It's determined by your ownership stake in a productive enterprise. You own a share of assets and future cash flows whether you vote or not. At some point every business will make a distribution - either share buybacks, dividends or at dissolution. Your share entitles you to a fraction of that. Shares have value regardless of whether someone else will buy them from you. It may be less than you paid, but that's not the same thing.
> Art, coins stamps.
These are much closer to NFTs than they are crypto. Each is unique. Due to their uniqueness there isn't a party constantly extracting value from your existing unique items (as miners do, by constantly producing more Bitcoin and selling it to pay their electric bills).
> Bitcoin also has some utility as a transaction medium.
> At some point every business will make a distribution
Except for bankruptcy.
Plus, I can’t remember an instance of common share holders receiving a non-dividend distribution. Some stocks don’t pay dividends and common share holders are at the back of the line in any liquidation event. If it’s not pure speculation it’s certainly in the ballpark.
A Ponzi Scheme is a very particular type of scam. A Ponzi Scheme is where the sum of all investor's reported account values exceed the total value of assets held by the institution.
It is totally valid to claim that Bitcoin is a scam, or that scammers are targeting Bitcoin, or scammers are using Bitcoin to scam people. You can say that the price is a pump-and-dump (but that's a factor of the price and promotion, not of Bitcoin), you can say that it is a low-liquidity market-manipulation scam (more a function of allowing leverage on exchanges). You can even call it a pyramid scheme, although, once again, you have to be careful because a pyramid scheme is a particular type of scam, which, on closer inspection, this is obviously not. Please stop saying Ponzi. You're besmirching the good name of a perfectly cromulent scam.
I don't think anyone calling Bitcoin a Ponzi scheme means it literally. They are just calling it a racket. And sure, the folks at the high level are racketeering, but that's not the majority of Bitcoin users/investors.
I think a lot of haters do, they align the behavioural qualities of a ponzi scheme with Bitcoin by pointing out how the only way a unit of BTC can have value is by selling it forward to another person.
Which is indeed a property of any money; if nobody wants it, it cannot have value.
However, I'm not sure they've taken the time to think about what the real-time monetization of a newly discovered commodity looks like. It took gold thousands of years to become a global currency, and now we have something similar but with the speed of the internet. With the physical properties of the Bitcoin protocol / blockchain (halving, fixed supply, etc.), it starts to look very obvious as to why people want to front run it, or use it as a store of value. And so the expected behaviour becomes obvious.
Tether manipulation of 'prices goes up', leads to fomo, leads to cashout of big players, leads to bagholding from retail who has no other option than joining the crypto cult to try to fomo others and move price back up
Honestly I think the innovation there is that it's a distributed Ponzi.
With any normal Ponzi scheme, there is "a guy", a guy at the center of it all cooking the books and redirecting the funds from late investors to early and skimming a healthy bit for himself. One day that guy gets arrested or decides it's time to run and the scheme collapses. Maybe that day comes a year in, maybe twenty, but it's a-coming.
With a distributed Ponzi scheme, there is no one guy. If some people get arrested for fraud or take their loot and run off somewhere, other people can step in and keep it all going, pumping and dumping and scamming and scheming.
I honestly don't know what it would take to actually make it go away for good.
Sure, one can say Bitcoin is not a Ponzi scheme because the definition of a Ponzi scheme is flexible. However, it's hard to deny that Bitcoin in not a bubble for the following reasons:
1. Prices are rising because of speculation
2. There is very little non-speculation use of Bitcoin (people are rarely using it for commerce).
3. There is no return on assets from Bitcoin. No yield, no dividend, etc.
Bitcoin could go to $1MM per coin, it's possible. But as a 'fiat' currency, it lacks the institutional backing of other currencies such as the USD. Plus, I would be concerned that nations with their own currency (US, China, etc) could smack Bitcoin pretty hard if they wanted.
Bitcoin is a really cool project/concept/social-experiment. But I do think there's some structural risks and I can't buy into some of the more evangelistic talk about it.
> But as a 'fiat' currency, it lacks the institutional backing of other currencies such as the USD
This is not what "fiat" means in monetary econ. USD is a fiat currency (meaning it is backed by government "fiat," which literally means "a formal authorization or proposition; a decree."
BTC is currently only currency at all in limited contexts, but it is difficult to classify in the established categories of money and fiduciary media. The bucket it gets closest to fitting into in how it works, given that it is not backed by anything except its own perceived value? Commodity money. That seems off, of course, since most (though not necessarily all) historical commodity moneys have had a clear, usually industrial, value, and commodities have traditionally been only physical (though that seems to be changing). Some economists are suggesting "synthetic commodity money" as a category for this, but we're still in the early days.
"But," you might reply, "commodity money has a price floor above zero that 'backs' its value." But while that's historically true (see note), it's not clear that it matters. Cryptos designed to be used as currencies are certainly bubbles through some lenses, but through the same lenses all commodity moneys look like bubbles. An economist friend discussing this with me around ~2013 pointed out "money is just a bubble that doesn't pop."
Say a precious metal commodity money trades for $1500/oz, but through a complex model economists estimate that its industrial value would be $100 if it weren't used as a medium of exchange (or speculatively, as a number of commodities like gold are held). A cryptocurrency, on the other hand, is trading for $1500/unit, and its price is estimated to be ~$0 without such use. One has a price floor of $100, and a "bubble" value of $1400/oz, while the other has a price floor of $0, and a "bubble" value of $1500/unit. Does that distinction make a difference? It's not actually clear.
It's certainly possible to imagine a cryptocurrency reaching a long-term equilibrium where it is considered valuable because it is a well-established medium of exchange and has reliable purchasing power. Imagine that someone has created this, and it happens to have the best money qualities (durability, portability, etc.) of any currency ever, plus great UX. How would it get there? Well, there would have to be a fairly drawn-out period of speculation where the value fluctuated pretty wildly as the market attempted to find an equilibrium based on future expectations of its value.
So cryptocurrencies now are behaving exactly as we'd expect them to behave if they were to one day become "synthetic commodity money." The question is whether any of them can actually find that equilibrium. It may not be possible to bridge that gap, whether because the fundamentals just don't work, or because the fluctuations are too strong to ever create a real equilibrium, or because the US or China finds a way to shut down any crypto that gets close. But stranger things that seemed less intuitively plausible have happened.
Note: usually -- there are some historical moneys that don't fit clearly into this paradigm, such as cowrie shells, of which the use in jewelry looks to have been more of a symptom rather than a cause of the value*
Well it is not a ponzi in the sense that there is no organiser and no promise of an underlying profitable enterprise.
It has become, functionally, a decentralized pyramid scheme.
Let's look at some of the criteria reviewed in the article.
- Investment Returns: Not Promised
The promise is peer to peer: players convince each other of investment returns and almost all players (that remain) are there because they believe in that promise. Once the last dude who wanted to buy pizza without giving Visa or Mastercard a cut has left the room...
- Open Source: The Opposite of Secrecy
Yes but that the mechanism of redistribution is (partially) in the open does not invalidate that something is a ponzi or a pyramid scheme. The openness is also partial, Bitcoin is still pseudonymous enough that we know what moves but not always who and why.
- No Pre-Mine
Early mining with exponential reduction in block reward is functionally equivalent to a pre-mine: the founder(s) have a considerable advantage. A bit more open but then one can also usually do well by buying early on the secondary market an explicitly premined coin that later becomes successful (e.g. ethereum). It's effectively a more elegant way to do a premine with nice deniability (harder to get caught for doing a security offering).
- Leaderless Growth
Yes it's decentralized. A decentralized pyramid scheme remains a pyramid scheme. It's not an intrinsic property of the tech but of the social happenings around it. (Many altcoins that are other instances of the same code have failed to get traction and become pyramid schemes.)
I don't know why you're being downvoted: You've hit the nail on the head - Bitcoin is a Pyramid scheme, not a Ponzi scheme.
I've been seeing comparisons to Ponzi schemes a lot in the last few weeks. AFAICS "Bitcoin as Ponzi scheme" is a useful strawman for pro-bitcoin arguments because it's so easily defeated. Bitcoin as Pyramid scheme is a much stronger argument, with far fewer articles dedicated to it.
What you're saying is kind of true, but it lacks a fundamental understanding how what makes the Bitcoin network valuable.
The first and foremost is security. Security in Bitcoin is a direct function of hashpower: the higher the hashpower, the more expensive a re-organization attack is and the sooner you can 'trust' newly appended blocks. The longer one has to wait to be sure a 51% attack hasn't occurred the less valuable the network is.
Secondly is scarcity. Bitcoin has a set number of coins which will exist and one of the strongest promises in the world that it will not change. This gives rational reason to hold on to Bitcoin in favor of 'objects of value' which are inflating or have the possibility of inflating.
You can always bring up the fact that traders want to sell higher than they bought and will communicate nefariously if it helps them achieve that goal. That is true for any asset. The misconception in your reading is that Bitcoin only derives value expected future returns, which as I have demonstrated is not true. What can often be confusing to wrap one's head around is that the more Bitcoin is worth in terms of mining cost (dollars currently), the more security it will have; the value goes up with the price, which for many doesn't pass a certain, unsophisticated smell test regarding scams.
If it sets off your alarms, refer back to where the value is coming from. You may not believe what gives Bitcoin its value is actually valuable, but, that's, just like, your opinion, man.
I commend the author for such an extensive piece, I am sure it took some time to write and put together.
For me, Bitcoin isn't really the problem. If anything, I would be happy if Bitcoin remained the cryptocurrency. And, maybe Ethereum, since I respect Vitalik's work on it and his determination.
Problem arises with all the other "shitcoins" and all the stink they bring with them. There is absolutely no valid reason to invest in alternative crypto (coins, NFT, etc,.) because it has no real-world use or direct application for the individual himself.[0]
And everything that will follow in the coming 12 months, it will be merely an attempt to validate it. Web3 (the crypto version) is hyped up so much that will inevitably face the music when an avalanche of tribulations come crashing down on it.
[0]: The argument that you can use alternative coins to replace expensive banking in poor countries is acceptable, but I don't think that is the point here.
The author seems to think that the detractors are accusing Satoshi of devising a Ponzi scheme and goes on to tell us why that's not the case. This is a strawman because the real Ponzi scheme is being perpetuated by financial whales who know full well that Bitcoin is not a "currency" and are pumping it up only to cash out.
The "buy the dip" promoters don't want their net worth going down and push that so that they can sell again at the peak
A Ponzi scheme is designed internally to reward its creators and early investors. This mechanism is kept a secret for obvious reasons. People who buy an asset to trade it want the price to go up - a not so clever point you've made. People with plans to sell Bitcoin for profit in a fiat currency are no more believers than the skeptics who won't touch blockchains. Your inability to distinguish salesmanship for facts about the network and global economic conditions does not mean they are the same thing.
Grifters will use the truth just as they will use a falsehood. All you've done is mistaken everything grifters say as a lie. People with solid opinions on Bitcoin(--anything--) form them on their own, not as an obtuse reaction to noise.
> A Ponzi scheme is designed internally to reward its creators and early investors.
Rewarding its creators and early investors is a reason to make a Ponzi scheme but it is not a defining characteristic. The characteristic issue is that there is some negative sum coefficient siphoning out value. In this case, it's the miners.
It's a fresh coat of paint, distributing the Ponzi-esque roles across numerous people.
The promoters and shills are separate from the value extractors are separate from the scheme operators.
The miners are not siphoning value, if that were true the network would not require them and there would be one thousand forked repos running off your imaginary system which secures account balances without the economic deterrent.
Yes they are. When new tokens are created through mining, they have to be sold on the market to pay the electric bills. This inflates the total supply and reduces liquidity. It extracts value.
The network requires them because they themselves control the network. It's the reason the block size wasn't increased.
> The network requires them because they themselves control the network. It's the reason the block size wasn't increased.
Have you heard of this little thing called, Bitcoin Cash? Did the miners prevent that? No, the users put the most value in what they deemed was most valuable. The miners do not have exclusive control over the network - if they did the protocol would be hyper-inflationary by now.
By the way, miners selling Bitcoin by definition does not decrease liquidity, it does the opposite, it puts more Bitcoin up for sale. The fact that miners have to sell to pay for electricity does not mean they siphon value, they provide security and are compensated for it you goofball.
> Just to be clear, I don't draw my opinions about Bitcoin, or money for that matter, from crypto detractors.
You've misunderstood. Your opinions seem to come from your emotional reaction to seeing grift, then applied broadly to all new things which the grift may be associated. You saying its not true doesn't make it so, which also applies to your comment about my use of the term 'fiat currency,' which I used exactly as I intended in line with the definition of the term.
A ponzi with no mal-intent from its creators is irrelevant. If the code is open source and participants understand what they are doing (which they majorly do in much of the space), then it is not a ponzi, users are not being duped.
If you're referring to the creation of a totally useless token and speculation on it, then you're talking about something else. Lumping all of crypto into that bucket is a popular, flawed, obnoxious cope.
> the code is open source and participants understand what they are doing (which they majorly do in much of the space), then it is not a ponzi, users are not being duped.
I don't know how you ended up with this logic. Is it not possible to run Ponzi schemes on a platform that is open source? How's the source being available prevent any pump and dump ponzi from happening?
Also, stop trying to do a psychological evaluation on me. If anything, you should be the one getting checked.
Then by your own admission the protocol itself is not the ponzi, but the speculation on top of it is. This can be true for anything which has a market price, and you've ceded the point without realizing.
Also keep in mind that The Bitcoin Network has a quantifiable measure of value and therefore not all trading of it can be labelled speculation, whether you agree on that value or not.
It's like a Ponzi because the vast majority of people who put money into it only make money because other people dump money into it, unlike a real investment which creates wealth by using capital to fuel productive activity that earns revenue.
So all investments which do not generate revenue are Ponzis then? What about precious metals - the by far number one use case for that material is sitting in a vault to hedge inflation.
No, you misunderstand. A business that fails to generate revenue is not a ponzi because the money invested into it is used to grow the business, the investment risk is based on the business fundamentals, unlike cryptocurrencny where the amount of money invested into it has no relationship to its capabilities.
With all due respect you misunderstood my own attempt to generalize. By your definition gold or fiat currencies are also Ponzis.
> ...unlike cryptocurrencny where the amount of money invested into it has no relationship to its capabilities.
The most fundamental thing about Bitcoin is that its price has a direct relationship to network security, which affects how soon you can be confident new blocks will not be out-mined - a clear value. If you don't believe me simply look up a chart comparing Bitcoin hashpower to its price.
That's partly true of the stock market too. We literally educate our kids about the stock market in economics class. We are constantly getting new people to dump money into the stock market.
Sure, if a company increases revenue the stock price tends to go up. However, there is no requirement that it does so. It tends to do so because people feel the stock has become more valuable. Same thing with Bitcoin, except things other than revenue cause people to feel like it has more value.
It's not the same thing at all. Stocks confer legal ownership of a productive enterprise so it makes sense that stock price increases when revenue increases; if the enterprise produces more revenue than a stake of ownership is worth more.
There is no requirement that stock price behaves in this way. There is a large speculative component and also a ponzi element (my first point) in the stock market system. "It's not the same thing at all" makes no sense. I'm describing how there are shared elements to both systems.
> if the enterprise produces more revenue than a stake of ownership is worth more.
And there are many things that a crypto can do to increase its value, for example:
1. Switch to a more efficient algorithm (PoW -> PoS).
2. Increased network effects.
3. Running for a longer time without hacks or the network going down.
> There is no requirement that stock price behaves in this way.
Obviously... but the reason you use the language "not a requirement" is because everyone knows that's typically how it works. Obviously there are various factors that impact a stock price, but pretty much all of them are a function of expected future revenue. If Apple were to announce a VR product line tomorrow, the stock price would instantly climb because investors would make a judgement that this new product will generate future revenue. With cryptocurrencies this dimension does not exist.
> And there are many things that a crypto can do to increase its value, for example
Even if we grant that these things might amplify the utility of a cryptocurrency, it still doesn't change the fact that buying cryptocurrency does not facilitate productive work, it's merely an exchange of value between two people, no wealth is created. When you invest in a company, you're giving it fuel to grow and create wealth by adding desirable goods and services to the economy. I understand that you believe cryptocurrencies provide a useful service, and even if we grant that, buying cryptocurrency does not make it more useful, it's simply shuffling bits around.
> A situation where the founder gave himself virtually no mining advantage over other early adaptors, sure is the “cleanest” approach.
The cleanest approach is to give no mining advantage over any adopter, early or late. By fixing the emission rate, for example at one coin per second forever [1].
Then it is a decentralized wildcat banking scheme with no FDIC/SIPC protection or any financial controls and auditing around fraud and risk, and the largest market participants think the world is upside down and that those regulations are the problem.
It is vulnerable to a systemic banking crisis that causes a bank panic / collapse across the entire system, with no entity large enough to step in and bail it out.
Up until now it was probably bailed out after the 2017 collapse by the actions of True Believer billionaires. At some point though as it grows then a billion here or there won't be sufficient to address the liquidity outflows, once you start talking about tens or hundreds of billions to backstop a crash then it'll fail.
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[ 1.5 ms ] story [ 128 ms ] threadBut cryptocurrency and derived technologies like NFTs are for the most part scams in the general sense. The type of scam varies but the system is ideal for the unscrupulous to fleece the get rich quick, tech illiterates who think they are smarter than they really are.
Tech-literates see the tech-illiterates getting scammed, and thereby extrapolate that the technology is fundamentally a scam, which is absurd.
Data structures, protocols, algorithms, exist at an abstraction layer below that of socio-economic-marketing scams.
But: Since "crypto" holds no intrinsic value, such as the backing of a states wealth, the actual material value of resources like gold, oil or coffee, or the structural value of a company (knowledge, employees, contracts), all its "value" is dependent on what other people are willing to pay for it, and the money these people have pumped into the system.
To put this in simplest terms: Every cent someone makes from whatevercoin, has to be put into the system by someone else. A house appreciates in value since living space is a scarce commodity facing growing demand...it's sarcity and thus its appreciation in value is a natural process caused by usefulness and demand.
The scarcity of blorkchain "currencies" however, is artificial, and they have no other use than as a token of value for something of actual worth.
(source: https://www.cardrates.com/advice/number-of-credit-card-trans...)
How many transactions are handled per day by major blorkchain currencies again?
You just fell over your own point there. Both houses and bitcoins go up in price if the demand for them goes up or the supply of them goes down... calling demand 'put into the system' when you disapprove changes nothing.
Also there are plenty of people who use houses as 'tokens of value' only to flip them when the market is favorable, and there are plenty of people who use crypto as a functional currency when other options are unfavorable to their circumstance.
Blorkchain "currencies" have no intrinsic value, because they have no other use than as tokens. Their market-value depends entirely on the market, entirely on the money pumped into the system.
In a way, blorkchain coins are a bit like overvalued stocks, the difference is, there is not even a company behind it, there is only the market evaluation.
Let me answer that by showing you a mirror perspective of your point;
Crypto has intrinsic value. People can use Crypto to exchange or store value bypassing dangerous intermediaries and structures of control. Its value was not put into the system, it simply exists, period. even if the housing market crashes, a crypto currency will still be useful and can appreciate. Cryptos market-value is dependent on both demand and usefulness. The second variable doesn't change.
Now the point here is that the mirror argument is about as right as yours. You can imagine ways crypto will devalue, i can imagine ways your house will devalue. You can imagine using your devalued house for things that are useful to you, i can imagine using a devalued crypto currency for things that are useful to me.
What are examples of these things?
Something which has no use other than as a token of value, once devalued, can no longer be used to exchange value. Sure, one could still transfer 100000000 whatevercoins to whoever after they are devalued, but what's the point if there is no value to them any more?
> People can use Crypto to exchange or store value bypassing dangerous intermediaries and structures of control.
EUR, USD and CNY wont suddenly lose a lot of their value overnight. They are tokens of value as well, with no use other that to exchange value between people. In that regard, they are similar to blorkchain "currencies". The difference lies in exactly these structures of control. They are regulated, and powerful actors (states) have an interest in their stability.
Its a feature, not a bug.
Scarcity in blockchains is not, let's say trivial, since you haven't described how being artificial is a detriment. If the Bitcoin Core developers, the exchanges, and all the largest whales all collaborated to increase the supply of Bitcoin in their interest, they would fail lest they somehow convinced everyone who puts value in the network (many put value in for the reason that the supply will likely never change) that the supply should change.
You should do a bit more research on how blockchains work and where there security comes from.
this "value" is also arguably "artifical" bc it is also derived from nebulous concepts like "trust"
I personally think deriding something bc it's source of value it's what I like is a fruitless exercise
It spends a lot of the time discussing the SEC's "warning signs" / red flags that something may be a Ponzi scheme which are symptoms and not causes. Just how a traditional Ponzi scheme may manifest within the context of traditional markets like 'issues with paperwork.' Nobody is going to claim that you need to have 'issues with paperwork' to be a Ponzi scheme.
Bitcoin is best thought of an a distributed or unbundled take on a Ponzi scheme where instead of having a single centralized authority run the whole show, various parties all collude directly or via incentive structure to achieve the same fundamental results.
> Investment Returns: Not Promised
They 100% are - by every single shillfluencer account on Twitter, on Reddit, on TikTok and yeah, even here from time to time. I've been NGMI'd here at least several hundred times.
> Open Source: The Opposite of Secrecy
Everyone agrees the chain is transparent. However, that's the kind of transparency that doesn't matter at all in this context.
What makes it a Ponzi scheme isn't that 1BTC=1BTC, it's that you have shady Inspector Gadget themed Bahamian shadow banks printing un-backed ersatz dollars and pushing the price up to create the illusion of gains. You have exchange "outages" as soon as the price starts dropping - but only when it starts dropping. You have spoof orders, wash trading, tape painting - every trick in the book - to make people think they've gained when in reality, they have not.
> No Pre-Mine
Yeah, all that means is it's not a security under Howey.
> Leaderless Growth
Yes, it's an old scheme with a fresh coat of paint.
> Section Summary: Clearly Not a Ponzi Scheme
Agree to disagree. I'm with Stolfi on this one.
1. It is sold as an investment, with some mysticism around how exactly it is appreciating in value.
2. All gains paid out to previous participants come from new participants.
3. Entities (miners, exchanges) are constantly extracting welfare for self-enrichment creating a negative sum coefficient.
[1] https://ic.unicamp.br/~stolfi/bitcoin/2020-12-31-bitcoin-pon...
Gold is a commodity with intrinsic value. It is an input into electronics manufacturing - in fact, you'd have a hard time making Bitcoin miners without it. It's also shiny and people like it, which adds to the demand. Folks are speculating on future commodity value. I don't think it's a good investment, but that's just me.
> Pokemon Cards, Stamps?
No, those are unique non-fungible items. Much closer to NFTs than BTC. There is no central entity extracting value by increasing the supply of these items, as each item is unique or at least fixed in supply.
I understand that, but it has commodity value.
> Its been traded for thousands of years because it is durable and difficult to produce. People who believe in Bitcoin compromised some sheen to make those two most important attributes tenfold more potent.
Nah, they got suckered into a Ponzi scheme.
That's got nothing to do with its price. Nothing is more difficult for someone else to produce than the hair on my head, but that's worthless.
What it is is the manifestation of the Greater Fool theory. The only reason you buy it is because of the expectation that some fool greater than yourself will pay an even higher price that you.
And if BTC is that, then NFTs are the Greater Fool theory to the second power.
[1] https://ic.unicamp.br/~stolfi/bitcoin/2020-12-31-bitcoin-pon...
If you look through the history of amazing scientific breakthroughs, I suspect you'll find that the ones that legitimately changed the world didn't require armies of self-proclaimed experts to explain to everyone what the benefit is and what problems it solves. However, when you look through the history of snake oil, boom-and-bust market crashes, and actual Ponzi schemes, that's exactly what you find.
If you want to convince people of cryptocurrencies merit, just go solve some real problems that real people have. The fact that cryptocurrency has been around for so long and no use-case has materialized outside of pump-and-dump get-rich-quick schemes tells you everything you need to know.
I don't know where it goes from here - its almost too late for it to prove any real world value. Also note that as equity assets tank so do crypto currencies - that strong correlation reflects how the Feds monetary policy has unfortunately inflated crypto. Wouldn't it be ironic if that was how Bitcoin actually did become a reserve currency (it won't because it doesn't behave like one and have underlying value similar to USD).
I mean the traits you describe are not wrong, it's just that crypto is not useful as a payment method due to transaction volume, value / exchange rate volatility, acceptance, etc.
For a laugh, people bought pizzas and the like with bitcoin. Nowadays they hold onto it because it might be worth fiat money. Why spend something as money if it could be worth 20% more tomorrow?
It's an unregulated trading product, it's not practical as electronic money. I mean it might become that, but it would need a lot more oversight, which will cost the traits you mentioned (peer to peer, censorship resistant, etc).
Hmm, we need to tell every Central Bank in the world that the gold bars they're holding aren't money.
Fort Knox must be a cover for government experimentation on aliens.
So its just some sort of very expensive commodity asset, which is used to store value, which we can expect to use to trade with other people, which USED to be money but somehow isn't anymore.
No they don't refer to it as money because words have meaning.
Sorry, gold is not money. You do know that right? It's a commodity. I think you and I talked about this - recently. Money is:
And of course our money is fiat which is:I didn't know that the silver and gold minted coins traded by Roman merchants were in fact not money, but commodities. There's just so much utility in carrying around sacks of metal shards.
It was money in Roman times. Luckily we have moved on. It is no longer money, unless you're planning on trading with Marcus Aurelius. Gold was demonetized in the 30s.
Its interesting because you were even brave enough to includ "coin" in your definition. Coins are made of rare earth metal blends, like silver, copper, nickel, and gold.
So metals are only money when its in a small circular token form factor, but not when its melted together into a heavier bar. Got it.
> Coins are made of rare earth metal blends, like silver, copper, nickel, and gold.
Those are not rare earth metals. They are metals, but not rare earth metals. Those are "any of a group of chemically similar metallic elements comprising the lanthanide series and (usually) scandium and yttrium. They are not especially rare, but they tend to occur together in nature and are difficult to separate from one another."
Also, nickel isn't rare by any definition. Nickel is the fifth most abundant element on Earth.
> So metals are only money when its in a small circular token form factor, but not when its melted together into a heavier bar. Got it.
No, that's also wrong. "The characteristics of money are durability, portability, divisibility, uniformity, limited supply, and acceptability."
Gold fails the acceptability test because to be money, something must be broadly accepted as a medium of exchange. It is not accepted by anyone. Walk into a Walmart with a brick of gold and they'll tell you to get stuffed. You'll get the same response at Home Depot or if you try and email Amazon. That's why it's not money.
> Oh, so only the government definition of money is whats relevant here, and only of the last ~100 years. Historical and physical contexts of money are irrelevant.
They're relevant in antiquity. Not so relevant today. Like a hitching post. What matters isn't even the government definition but rather the social definition.
So while it seems strange to refer to ramen noodles as money in some contexts, and especially from the outside, the economic behavioural context allows us to attribute monetary function to this commodity, and allows us to say it is being used as a money.
When I'm talking about crypto/bitcoin/money, I am using a global trade and historical context, the macro concept of money outside of any single government, currency, or system. I am using money in an economic behavioural concept; something people use to trade and save with.
I understand you're not willing to accept or trade with Bitcoin, which is why it is not money to you.
But there are those that do accept it, and every year the numbers grow. Thus it is already money, and it is only a matter of time before it becomes de facto "money"
If you need long term value storage, use Bitcoin.
Price volatility is a result of trading volume and short term human behaviour. If you have enough imagination, predict what happens to volatility if mass adoption occurs.
Which is kind of the definition of a deflationary currency.
We've been through all of this already with the gold standard: it was useful for a time, but the pros and cons have generally been weighed and the consensus seems to be not to use it.
What if Satoshi wanted Bitcoin to be digital cash but with a limited supply like gold?
From the bitcoin whitepaper:
The steady addition of a constant of amount of new coins is analogous to gold miners expending resources to add gold to circulation.
Before Bitcoin there was no ‘cash’ on the internet. Only electronic corporate (controlled) money.
Bitcoin is an attack on the core foundations of our society and is trying to actively undermine democracy. Thankfully it's pretty ineffective so far.
What "democracy" is this? Is that the word you're using for a "choice" between Biden and Trump? Good grief.
Without an attached justification I can't tell whether this is serious or not.
I'm a big beginner believer in Kreiskyan deficit spending for example. Good luck trying to do that once you can no longer print your own money.
Deficit spending is stealing from the future. Bitcoin is sound money, hard money. You can’t steal from your children to pay your bills today.
If you look at what Bruno Kreisky did, you'll see that he didn't "steal from" the future, he invested for it. He basically built the modern Austria I know and love.
I also think the whole "stealing from the future" talking point is BS - to paraphrase Keynes, in the future we'll all be dead :-).
But it's okay for us to disagree here. In a democracy, we can just vote for somebody that represents our views. If either of us can convince the majority to see things our way, we'll get our way.
Now if we had an inflexible monetary system like the one you're proposing, even if the vast majority voted to do things my way, we couldn't anymore, because we robbed the democratically elected state of its power.
This is what I mean when I say Bitcoin is antidemocratic. It entrenches your ideology on a technological level and removes all democratic control.
You don’t want people messing with the money. You can’t trust people and you certainly can’t trust the Keynesians. Taking this power away from the abusers gives power BACK to the people.
You might not agree with my view, but to try to suppress it is antidemocratic.
> You don’t want people messing with the money.
You don’t want people messing with the money. I do. You're trying to remove my democratic right to elect somebody who will do what I want.
I don't care what Satoshi said - he's not some all-knowing saintlike figure. I want the central bank to be able to debase currency. I don't believe in the same things as you and you are attacking my democratic right to see my values reflected in society.
> Taking this power away from the abusers gives power BACK to the people
If you define "the people" as "everyone that agrees with you", sure. But that's an awfully authoritarian thing to do, isn't it?
The good thing about the parallel economies is we can both have it. You can have your rapidly inflating made up Euro, manipulated by your elected and unelected politicians and Bitcoiners can divide everything of value on the planet by 21M BTC. Thing is, as the fiat gets worse and worse, more people will choose to save in things like Bitcoin. Are you familiar with Gresham’s Law?
You are trying to word this like folks are pushing this on you. Nothing is further from the case. Opt-in.
I’m not defining the people as anything. Everyone is free to believe whatever they wish.
Your opt-in is actively harmful to democratic society.
You're saying "don't worry, you don't need to break the social contract, but we will and we'll make it easy for others to do so, too. And if our sabotage makes everything collapse, well I guess that proves we were right all along. wink"
Who’s pushing their authoritarian agenda now.
The only worse thing than having people that might practice bad monetary policy having power over the currency is having bad monetary policy immutably baked into the structure of the currency.
Totally agreed. Lucky it’s opt-in and voluntary! You are welcome to earn and spend money in whatever currency you wish.
The environmental effects are not opt-in, they're externalized to everyone else living on the planet:
* https://digiconomist.net/bitcoin-energy-consumption/
If a few terrorists voluntarily fly a plane into a building, they're still taking countless innocents with them.
- Its failures at being a store and measure of value (wild and arational daily value swings) and medium of exchange (long confirm times)
- Real life environmental impacts (overblown, yes, but still glossed over)
- Criminal enablement (there's a reason most forms of ransomware use crypto)
- Scams everywhere
- Knock-on effects on the real world (tried to buy a GPU lately?)
- OPSEC issues (it's a lot harder to secure a crypto wallet than a credit card)
1. Some of those problems are being solved. 2. Some of those problems exist in other socially-accepted technologies and we've learned to deal with it. 3. People have trouble thinking abstractly and don't think deeply enough about their criticisms.
I'll briefly try to address your points:
- Stablecoins are going to be the answer here. In the future I think people will take out micro-loans in stablecoins with their bitcoin/ethereum/etc as collateral. Daily purchases will be in stablecoins. Confirmation times are actively being worked on, namely single-slot finality in ethereum.
- This is being worked on. Ethereum is actively testing their new proof-of-stake algorithm as we speak with the goal of a full release in the next 3-6 months. Bitcoin is another story but I think it's a mistake to lump all cryptocurrencies together.
- Criminal enablement. This exists but is vastly overblown. It turns out that transactions being public is risky for criminals.
- Email has phishing scams. Phones have scams. Internet popups have scams. Any open technology is going to have scams. I suspect this will improve as we develop a social framework to educate people. How many times have you hear warnings about phishing? We can do the same with crypto.
- This is being worked on. You don't need a GPU for proof-of-stake.
- This is being worked on via UX and technology. Smart wallets for example allow people to recover their funds if they lose their keys.
Ether's ecosystem is a lot more promising, but still has a ton of rockiness. More specifically, I'm not confident in the core usability problems being UX implementation details. People don't want to have to think this much when making mundane purchases.
Also, I'd argue just being as good as the existing systems is mere table stakes. It needs to be better (outside of being a speculation vehicle). That is one I truly don't see happening. The anonymity/uncensorability benefits are questionable, the valuation problem appears to rely exclusively on fickle market whims or corrupt centralized entities, lack of refundability is an anti-feature for the mass market (and only solvable with centralized middlemen, which obviates half the reason to be using a crypto in the first place!)
The advocates will of course mention that fiat money and stocks also depend on trust, but both of those have very powerful organizations presiding over them who ensure that the value of e.g. the dollar will not crash overnight, or that you will be compensated if your account gets plundered, or who will pause trading on a stock (or the market as a whole) if people start panicking and acting irrationally. Decentralized products (whether you consider cryptocurrencies money or assets) do not have these securities and guarantees. Individual players like exchanges might, but if one exchange decides to pause trading, the others will gladly take over that business.
Don’t Trust. verify.
- How are you verifying the contents and beneficial ownership of exchange wallets?
- How are you verifying market activity is legitimate, and there's no wash trading, spoofing or tape painting?
The underlying L1 is so utterly incapable that entire centralized, trusted and opaque businesses have to be built on top of and around it - offering none of the guarantees of the underlying - just to get past the fact it can't actually support more transactions than a mid-sized Costco.
I feel nothing for wild swings to my net worth. If anything, it has made the very concept of money more nebulous to me.
Yeah, no, but I do wish you luck with that. [1] USDT is 50% more volume than BTC and ETH combined. It's all the liquidity in the entire market. It's more important now than ever.
[1] https://www.bloomberg.com/news/features/2021-10-07/crypto-my...
The verification you refer to prevents double spending. It does not prevent insane valuation swings due to sentiment, government action, etc. That makes it a worse store of value than most fiat currencies.
Just like any fiat currency?
A fiat currency will only collapse if you lose faith in the state, your fellow humans and the ability of the judicial system to enforce repayment.
Once that happens you have much bigger problems. Like Mad Max style problems.
It will also collapse if people fear that the government will print too much money.
[0] https://purse.io
Really? Name a single one lol. Chivo is a MySQL store. And a garbage one at that. They only use Lightning to transfer value internationally between their own two accounts that they could do instead with an addition and a paired subtraction. Nobody uses Lightning. Nobody's ever used Lightning. Not to mention all the liquidity is provided by 3 centralized entities. [1]
I don't think Monero actually offers the level of security that most folks think it does, and Hydra still uses BTC no?
I did forget to mention ransomware payments, so thank you.
[1] https://bitcoinvisuals.com/lightning
Chivo is one wallet. Agree it’s not great but El Salvador vendors hav implemented Point of Sale Lightning Network. It is an open system and you can use one of many mobile LN wallets. Chivo is probably the weakest. You will find that McDonalds, Starbucks, the local fruit vendor on the street can process an open LN tx. No sweat. “Nobody uses it”. Yeah ok. Those graphs indicate non zero channel balances and nodes.
Monero still has the 650k bounty on tx de anonymization. If you have a way, feel free to claim it.
RW. Sigh.
> “Nobody uses it”. Yeah ok. Those graphs indicate non zero channel balances and nodes.
I didn't see a country come on line in the charts. I see twice as many people using it as 3 years ago and virtually zero increase in usage post-El Salvador.
At the end of the day it's boat anchored to a worthless L1 which would require 75 years and ~1/3 of a trillion dollars to open a channel for everyone on earth.
I think you are being willfully ignorant about this. You said no country uses it: and I said yes they do. You said chivo sucks, I said yeah, but you can use any LN wallet.
I don’t know what more I can say. You are living in the past man, making excuses for the Fed and the State. Things have moved on, and I feel like you will be screaming as more nations adopt this. El Salvador is mining BTC from geothermal power from Volcanos.
https://bisq.network
My point was that fiat currencies live and die by the trust in governments that issue them. "Full faith and credit".
Luckily that never happens.
https://morninginvest.com/venezuelas-currency-collapse/
[1] https://www.bloomberg.com/news/articles/2021-01-13/venezuela...
It can happen, it has happened, and will happen again.
Anything could happen at any time. But I don't live my life with a pile of weapons, canned peaches and ammo. That's prepper talk.
We have no idea what a hypothetical apocalyptic failed state America looks like. There's no guarantees that there won't be a single entity with more than 50% of the hash power. There's no guarantee that the internet will be up. There's so many things that have to go exactly right to think we'll be trading spreadsheet cells in the apocalypse.
Also, it's completely opt-in, you don't ever need to buy any Bitcoin if you don't want to. It's going to crash and burn, or prosper on its own merits.
Consider that Iceland has a wonderfully stable currency and no standing army. It's got nothing to do with the army.
[1] https://www.bloomberg.com/news/articles/2021-01-13/venezuela...
And look where that got us: the federal reserve printed trillions of dollars in 2020 to prop up the stock market.
They didn't print money to prop up the stock market, first of all, that was a side-effect.
A massive shock to the economy - remember COVID? - caused people to go home and stop working - to save money instead of spending it - and broke down supply chains. Without intervention this would have led to a deflationary spiral where merchants tried to lower the prices to incentivize spending, but of course this would mean they had less money to pay employees, which in turn meant employees couldn't afford goods - and so on. [1] All of the worst periods in world history were deflationary.
So the money supply was increased via QE swaps (which by the way, just swap assets on the books at banks with reserves to collateralize loans) and lower interest rates. This allowed folks to go back to work and allowed the economy to resume functioning.
Money isn't printed and handed out. Money enters the system via lending. All the money that was created will blink out of existence as the loans it was issued against are repaid. The Fed can reduce the supply if the supply itself is causing prices to go up - but it is not. The Fed has the tools to reduce supply just as it has the tools to increase the supply.
A lot of excess liquidity went into assets, but as interest rates go up, it'll come right back out and blink out of existence. So what?
The Federal Reserve literally saved the economy.
Explain to me how this is bad in any way?
This feels a lot like people complaining bitterly about the 2008 bailouts - which by the way were loans not grants, and have been repaid netting the US government over $100B in profits. [2]
Maybe, just maybe, the Fed isn't a scam?
[1] https://www.investopedia.com/terms/d/deflationary-spiral.asp
[2] https://projects.propublica.org/bailout/
It's right in the Genesis block:
> The Times 03/Jan/2009 Chancellor on brink of second bailout for banks
The real problem that people have is that the money we currently use is corruptible by those in power.
Funny how you carefully avoided making any solid points here. Let's assume what we all know you're saying - Bitcoin, if it was legitimate, would not require shills in order to be successful. Since Bitcoin is fully capable of securing $1 trillion dollars worth of value (unhackable despite the massive prize) I would say its had some success. Are there many shills around for Bitcoin today? Yes. What does that have to do with its success or value?
Even further obliterating the point you were too scared to make directly: the initial momentum which got Bitcoin started and gave the protocol its security which gave it that aforementioned success in security was grassroots and based in technological and academic interest. This is very clearly spelled in the blog post. Did you read the content before forming your thoughts about it? You might as well have not. Embarrassing.
This definitely isn't it.
The big problem with cryptocurrencies is that most of their promised "benefits" are actually detriments to people who are not anarchocapitalists (or close to it).
We don't want government control of money to be "disrupted", because governments are actually, in principle, accountable to us. The fact that there are certain prominent governments that have become corrupted by big money in practice is not even close to a good justification for tossing the whole "democracy experiment" out the window and replacing it with something that in principle does not answer to regular people in any way, shape, or form, and is very likely in practice to be ruled by those with big money from the outset.
We have about 80% of a working system already in place. What we need to do is fix the broken 20%, not have the absolute hubris to think that because we're The Smartest Guys In The Room, we can build a better, fairer, system that's built on the pure beauty of unfettered technology.
I don't think the mere presence of a lot of internet arguers is particularly strong evidence of anything, tbh.
A common argument I hear from crypto folks is that government-backed currencies are susceptible to hyperinflation, as if cryptocurrencies aren't. But I don't see how this is the case. Once the growth stops, what is stopping everyone from pulling out?
Basically, you're trusting the market to not debase your currency instead of a single issuer.
I thought that was sort of the point, that crypto wasn't really meant to be an investment class, but more of a stable store of value like a currency. The mix-in at present is it's not a de-facto currency, so the price is highly volatile due to people treating it as an investment, speculating, gambling, etc.
And then the conflict to be wary of, or the question always in the back of my mind when looking at the promoters, is there own investments do better when they sell others on the same investment.
Sufficiently large, they are not. What made you think they were?
Assuming you have a de facto currency which is non-inflationary, the value in holding it rather than redirecting liquidity to another asset class is that holding it is the least risky option. The reason money was directed in to the non-inflationary asset in the first place was that the de facto currency was actively devaluing itself through inflation.
The larger concerns of a currency which cannot inflate are the economic problems which can come along with such stiffness - keyword: "deflationary crash."
That we managed to make this happen without a central entity that can run off with the money, with lots of people invested in the middle of the pyramid (the author, presumably) also doing the evalgalizing makes it technically different, but not practically. Collapse is always coming, to various degrees of severity.
If not to Bitcoin at one time, then to the planet. And GPU availability.
And before anyone tries to make a stock market comparison: No, this isn’t the same as stocks.
Stocks are, literally, partial ownership of a company. A shareholder owns part of the underlying company, including everything from their bank balances to their brand.
Bitcoin would be like subtracting out all of the valuable parts of a company and leaving nothing but the shares behind. You get an entry in a database (the blockchain) and nothinf else. Literally the only thing that gives this database entry any value is the ability to convince someone else to give you money in exchange for it.
https://en.m.wikipedia.org/wiki/Non-voting_stock
Stocks give you voting rights at the AGM and a claim on future profits through stock appreciation or dividends if the company decides to issue dividends.
Its value comes from being in a secure, immutable database, accessible from any point on the planet with an internet connection, censorship resistant, and more private.
You could say that about lots of investments:
* art
* non-voting stock shares
* coins/stamps
* etc.
Anything with limited/finite supply can increase in value provided there is demand.
Who’s to say that someone’s enjoyment of a piece of modern art is somehow more real or valuable than someone’s enjoyment of holding Bitcoin?
Bitcoin also has some utility as a transaction medium.
The debate is wether or not it’s a smart investment, but as far as investments go it’s characteristics are not unlike many other forms that have provided sustained returns for decades, centuries or more.
No. Share value isn't determined by voting rights alone. It's determined by your ownership stake in a productive enterprise. You own a share of assets and future cash flows whether you vote or not. At some point every business will make a distribution - either share buybacks, dividends or at dissolution. Your share entitles you to a fraction of that. Shares have value regardless of whether someone else will buy them from you. It may be less than you paid, but that's not the same thing.
> Art, coins stamps.
These are much closer to NFTs than they are crypto. Each is unique. Due to their uniqueness there isn't a party constantly extracting value from your existing unique items (as miners do, by constantly producing more Bitcoin and selling it to pay their electric bills).
> Bitcoin also has some utility as a transaction medium.
It really doesn't.
> It really doesn't.
It is pretty difficult to support an argument that Bitcoin has zero value as a transaction medium.
Except for bankruptcy.
Plus, I can’t remember an instance of common share holders receiving a non-dividend distribution. Some stocks don’t pay dividends and common share holders are at the back of the line in any liquidation event. If it’s not pure speculation it’s certainly in the ballpark.
Ultimately everything is a ponzi, for some definition of a ponzi. Likewise securities fraud.
Shortages are still produced as everyone competes for the same limited silicon.
> Ultimately everything is a ponzi, for some definition of a ponzi. Likewise securities fraud.
No, it most certainly is not lol.
It is totally valid to claim that Bitcoin is a scam, or that scammers are targeting Bitcoin, or scammers are using Bitcoin to scam people. You can say that the price is a pump-and-dump (but that's a factor of the price and promotion, not of Bitcoin), you can say that it is a low-liquidity market-manipulation scam (more a function of allowing leverage on exchanges). You can even call it a pyramid scheme, although, once again, you have to be careful because a pyramid scheme is a particular type of scam, which, on closer inspection, this is obviously not. Please stop saying Ponzi. You're besmirching the good name of a perfectly cromulent scam.
Which is indeed a property of any money; if nobody wants it, it cannot have value.
However, I'm not sure they've taken the time to think about what the real-time monetization of a newly discovered commodity looks like. It took gold thousands of years to become a global currency, and now we have something similar but with the speed of the internet. With the physical properties of the Bitcoin protocol / blockchain (halving, fixed supply, etc.), it starts to look very obvious as to why people want to front run it, or use it as a store of value. And so the expected behaviour becomes obvious.
The non-negligible amounts of comparison to bernie madoff or enron suggests otherwise.
Tether manipulation of 'prices goes up', leads to fomo, leads to cashout of big players, leads to bagholding from retail who has no other option than joining the crypto cult to try to fomo others and move price back up
It's pretty obvious
With any normal Ponzi scheme, there is "a guy", a guy at the center of it all cooking the books and redirecting the funds from late investors to early and skimming a healthy bit for himself. One day that guy gets arrested or decides it's time to run and the scheme collapses. Maybe that day comes a year in, maybe twenty, but it's a-coming.
With a distributed Ponzi scheme, there is no one guy. If some people get arrested for fraud or take their loot and run off somewhere, other people can step in and keep it all going, pumping and dumping and scamming and scheming.
I honestly don't know what it would take to actually make it go away for good.
1. Prices are rising because of speculation
2. There is very little non-speculation use of Bitcoin (people are rarely using it for commerce).
3. There is no return on assets from Bitcoin. No yield, no dividend, etc.
Bitcoin could go to $1MM per coin, it's possible. But as a 'fiat' currency, it lacks the institutional backing of other currencies such as the USD. Plus, I would be concerned that nations with their own currency (US, China, etc) could smack Bitcoin pretty hard if they wanted.
Bitcoin is a really cool project/concept/social-experiment. But I do think there's some structural risks and I can't buy into some of the more evangelistic talk about it.
This is not what "fiat" means in monetary econ. USD is a fiat currency (meaning it is backed by government "fiat," which literally means "a formal authorization or proposition; a decree."
BTC is currently only currency at all in limited contexts, but it is difficult to classify in the established categories of money and fiduciary media. The bucket it gets closest to fitting into in how it works, given that it is not backed by anything except its own perceived value? Commodity money. That seems off, of course, since most (though not necessarily all) historical commodity moneys have had a clear, usually industrial, value, and commodities have traditionally been only physical (though that seems to be changing). Some economists are suggesting "synthetic commodity money" as a category for this, but we're still in the early days.
"But," you might reply, "commodity money has a price floor above zero that 'backs' its value." But while that's historically true (see note), it's not clear that it matters. Cryptos designed to be used as currencies are certainly bubbles through some lenses, but through the same lenses all commodity moneys look like bubbles. An economist friend discussing this with me around ~2013 pointed out "money is just a bubble that doesn't pop."
Say a precious metal commodity money trades for $1500/oz, but through a complex model economists estimate that its industrial value would be $100 if it weren't used as a medium of exchange (or speculatively, as a number of commodities like gold are held). A cryptocurrency, on the other hand, is trading for $1500/unit, and its price is estimated to be ~$0 without such use. One has a price floor of $100, and a "bubble" value of $1400/oz, while the other has a price floor of $0, and a "bubble" value of $1500/unit. Does that distinction make a difference? It's not actually clear.
It's certainly possible to imagine a cryptocurrency reaching a long-term equilibrium where it is considered valuable because it is a well-established medium of exchange and has reliable purchasing power. Imagine that someone has created this, and it happens to have the best money qualities (durability, portability, etc.) of any currency ever, plus great UX. How would it get there? Well, there would have to be a fairly drawn-out period of speculation where the value fluctuated pretty wildly as the market attempted to find an equilibrium based on future expectations of its value.
So cryptocurrencies now are behaving exactly as we'd expect them to behave if they were to one day become "synthetic commodity money." The question is whether any of them can actually find that equilibrium. It may not be possible to bridge that gap, whether because the fundamentals just don't work, or because the fluctuations are too strong to ever create a real equilibrium, or because the US or China finds a way to shut down any crypto that gets close. But stranger things that seemed less intuitively plausible have happened.
Note: usually -- there are some historical moneys that don't fit clearly into this paradigm, such as cowrie shells, of which the use in jewelry looks to have been more of a symptom rather than a cause of the value*
It has become, functionally, a decentralized pyramid scheme.
Let's look at some of the criteria reviewed in the article.
- Investment Returns: Not Promised
The promise is peer to peer: players convince each other of investment returns and almost all players (that remain) are there because they believe in that promise. Once the last dude who wanted to buy pizza without giving Visa or Mastercard a cut has left the room...
- Open Source: The Opposite of Secrecy
Yes but that the mechanism of redistribution is (partially) in the open does not invalidate that something is a ponzi or a pyramid scheme. The openness is also partial, Bitcoin is still pseudonymous enough that we know what moves but not always who and why.
- No Pre-Mine
Early mining with exponential reduction in block reward is functionally equivalent to a pre-mine: the founder(s) have a considerable advantage. A bit more open but then one can also usually do well by buying early on the secondary market an explicitly premined coin that later becomes successful (e.g. ethereum). It's effectively a more elegant way to do a premine with nice deniability (harder to get caught for doing a security offering).
- Leaderless Growth
Yes it's decentralized. A decentralized pyramid scheme remains a pyramid scheme. It's not an intrinsic property of the tech but of the social happenings around it. (Many altcoins that are other instances of the same code have failed to get traction and become pyramid schemes.)
I've been seeing comparisons to Ponzi schemes a lot in the last few weeks. AFAICS "Bitcoin as Ponzi scheme" is a useful strawman for pro-bitcoin arguments because it's so easily defeated. Bitcoin as Pyramid scheme is a much stronger argument, with far fewer articles dedicated to it.
The first and foremost is security. Security in Bitcoin is a direct function of hashpower: the higher the hashpower, the more expensive a re-organization attack is and the sooner you can 'trust' newly appended blocks. The longer one has to wait to be sure a 51% attack hasn't occurred the less valuable the network is.
Secondly is scarcity. Bitcoin has a set number of coins which will exist and one of the strongest promises in the world that it will not change. This gives rational reason to hold on to Bitcoin in favor of 'objects of value' which are inflating or have the possibility of inflating.
You can always bring up the fact that traders want to sell higher than they bought and will communicate nefariously if it helps them achieve that goal. That is true for any asset. The misconception in your reading is that Bitcoin only derives value expected future returns, which as I have demonstrated is not true. What can often be confusing to wrap one's head around is that the more Bitcoin is worth in terms of mining cost (dollars currently), the more security it will have; the value goes up with the price, which for many doesn't pass a certain, unsophisticated smell test regarding scams.
If it sets off your alarms, refer back to where the value is coming from. You may not believe what gives Bitcoin its value is actually valuable, but, that's, just like, your opinion, man.
I wouldn't hold a large amount of US dollars as an investment either.
For me, Bitcoin isn't really the problem. If anything, I would be happy if Bitcoin remained the cryptocurrency. And, maybe Ethereum, since I respect Vitalik's work on it and his determination.
Problem arises with all the other "shitcoins" and all the stink they bring with them. There is absolutely no valid reason to invest in alternative crypto (coins, NFT, etc,.) because it has no real-world use or direct application for the individual himself.[0]
And everything that will follow in the coming 12 months, it will be merely an attempt to validate it. Web3 (the crypto version) is hyped up so much that will inevitably face the music when an avalanche of tribulations come crashing down on it.
[0]: The argument that you can use alternative coins to replace expensive banking in poor countries is acceptable, but I don't think that is the point here.
The "buy the dip" promoters don't want their net worth going down and push that so that they can sell again at the peak
Grifters will use the truth just as they will use a falsehood. All you've done is mistaken everything grifters say as a lie. People with solid opinions on Bitcoin(--anything--) form them on their own, not as an obtuse reaction to noise.
Rewarding its creators and early investors is a reason to make a Ponzi scheme but it is not a defining characteristic. The characteristic issue is that there is some negative sum coefficient siphoning out value. In this case, it's the miners.
It's a fresh coat of paint, distributing the Ponzi-esque roles across numerous people.
The promoters and shills are separate from the value extractors are separate from the scheme operators.
The network requires them because they themselves control the network. It's the reason the block size wasn't increased.
Have you heard of this little thing called, Bitcoin Cash? Did the miners prevent that? No, the users put the most value in what they deemed was most valuable. The miners do not have exclusive control over the network - if they did the protocol would be hyper-inflationary by now.
By the way, miners selling Bitcoin by definition does not decrease liquidity, it does the opposite, it puts more Bitcoin up for sale. The fact that miners have to sell to pay for electricity does not mean they siphon value, they provide security and are compensated for it you goofball.
> Your inability to distinguish salesmanship for facts about the network and global economic conditions does not mean they are the same thing.
And by calling real money "Fiat currency" you've demonstrated your complete lack of understanding of finance.
I was only pointing out that for this to be a Ponzi scheme, it doesn't require any malintent from its creator.
You've misunderstood. Your opinions seem to come from your emotional reaction to seeing grift, then applied broadly to all new things which the grift may be associated. You saying its not true doesn't make it so, which also applies to your comment about my use of the term 'fiat currency,' which I used exactly as I intended in line with the definition of the term.
A ponzi with no mal-intent from its creators is irrelevant. If the code is open source and participants understand what they are doing (which they majorly do in much of the space), then it is not a ponzi, users are not being duped.
If you're referring to the creation of a totally useless token and speculation on it, then you're talking about something else. Lumping all of crypto into that bucket is a popular, flawed, obnoxious cope.
I don't know how you ended up with this logic. Is it not possible to run Ponzi schemes on a platform that is open source? How's the source being available prevent any pump and dump ponzi from happening?
Also, stop trying to do a psychological evaluation on me. If anything, you should be the one getting checked.
Also keep in mind that The Bitcoin Network has a quantifiable measure of value and therefore not all trading of it can be labelled speculation, whether you agree on that value or not.
Isn't that what my original comment was?
Aside from that, Bitcoin is still a flawed model stemming from an incorrect understanding of money _whether you agree or not_
That it's _only_ used to run ponzi schemes is a problem on top of that.
> ...unlike cryptocurrencny where the amount of money invested into it has no relationship to its capabilities.
The most fundamental thing about Bitcoin is that its price has a direct relationship to network security, which affects how soon you can be confident new blocks will not be out-mined - a clear value. If you don't believe me simply look up a chart comparing Bitcoin hashpower to its price.
Sure, if a company increases revenue the stock price tends to go up. However, there is no requirement that it does so. It tends to do so because people feel the stock has become more valuable. Same thing with Bitcoin, except things other than revenue cause people to feel like it has more value.
> if the enterprise produces more revenue than a stake of ownership is worth more.
And there are many things that a crypto can do to increase its value, for example:
1. Switch to a more efficient algorithm (PoW -> PoS).
2. Increased network effects.
3. Running for a longer time without hacks or the network going down.
4. More projects being built on top.
Obviously... but the reason you use the language "not a requirement" is because everyone knows that's typically how it works. Obviously there are various factors that impact a stock price, but pretty much all of them are a function of expected future revenue. If Apple were to announce a VR product line tomorrow, the stock price would instantly climb because investors would make a judgement that this new product will generate future revenue. With cryptocurrencies this dimension does not exist.
> And there are many things that a crypto can do to increase its value, for example
Even if we grant that these things might amplify the utility of a cryptocurrency, it still doesn't change the fact that buying cryptocurrency does not facilitate productive work, it's merely an exchange of value between two people, no wealth is created. When you invest in a company, you're giving it fuel to grow and create wealth by adding desirable goods and services to the economy. I understand that you believe cryptocurrencies provide a useful service, and even if we grant that, buying cryptocurrency does not make it more useful, it's simply shuffling bits around.
Bravo.
The cleanest approach is to give no mining advantage over any adopter, early or late. By fixing the emission rate, for example at one coin per second forever [1].
[1] https://john-tromp.medium.com/a-case-for-using-soft-total-su...
Then it is a decentralized wildcat banking scheme with no FDIC/SIPC protection or any financial controls and auditing around fraud and risk, and the largest market participants think the world is upside down and that those regulations are the problem.
It is vulnerable to a systemic banking crisis that causes a bank panic / collapse across the entire system, with no entity large enough to step in and bail it out.
Up until now it was probably bailed out after the 2017 collapse by the actions of True Believer billionaires. At some point though as it grows then a billion here or there won't be sufficient to address the liquidity outflows, once you start talking about tens or hundreds of billions to backstop a crash then it'll fail.